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Published: Wednesday, 4/20/2005

Informal survey finds mixed credit knowledge

BY MARY-BETH McLAUGHLIN
BLADE BUSINESS WRITER

Many Americans borrow to help finance their lifestyles, so it would seem to make sense they would be well versed on credit histories, annual percentage rates, and types of credit.

But that's not always the case. To help educate consumers, the Association of Credit and Collection Professionals this week devised a quiz.

The issue is of concern for the Minneapolis trade group, which said yesterday that a new survey found that 92 percent of respondents think Americans carry too much debt and three out of four think it has become acceptable not to repay.

Some downtown Toledo workers were asked questions yesterday from the group's quiz, and most knew basic tenets of credit but had trouble with terms.

Sue Koogan, a Wauseon resident who works at a law firm as a receptionist/secretary, knew that consumers are responsible for up to $50 when a credit card is stolen.

But asked to choose whether a car loan, mortgage, or credit card is considered a revolving account, Ms. Koogan, 40, said all could be right. "They all are because revolving means everything you pay monthly. You know, revolving means around and around."

But of that group, only credit cards are revolving accounts because they have no set period in which they must be paid off.

Toledoan Bobby Johnson, 53, an information systems manager, knew that "the balance calculation method" is the most important item to consider, after the annual percentage rate, when choosing a credit card because it most directly affects how much someone will pay in finance charges.

He carries a mixture of bank and store cards, some of which have carry-over balances. But the balances aren't nearly as high as some people's.

"If I get a big cash flow, I try to get mine to the halfway mark of my balance."

Christopher Smith, an 18-year-old restaurant worker, knew that "pay your bills on time" is the correct answer to the question: What is the single most important way to maintain a positive credit history?

But he admitted it was just an educated guess rather than the voice of experience. "I tried to apply for a few credit cards, but they wouldn't give them to me because I have no credit."

Richard Call, regional vice president of Consumer Credit Counseling Services of the Midwest Inc., said he's not surprised by incorrect answers.

Nearly three of every four people destroy the "changes in terms and conditions" they receive in the mail from their credit card companies.

"Credit education is really important because most Americans think they know more than they actually know about credit," he said.

"I think the earlier we can get young adults to understand the rules of life, I think the better off they're going to be."

Contact Mary-Beth McLaughlin at mmclaughlin@theblade.com

or 419-724-6199.

1. B. The formula to determine credit score places the most

weight on bill-paying habits. Paying bills on time is the best way to

build a positive credit history.

2. D. Credit grantors check credit history before deciding whether

to lend, many insurers check credit, and prospective employers

sometimes check a job applicant s credit history to assess reliability

and integrity.

3. B. Although each answer should be considered, the one other than

the annual percentage rate that will most directly affect how much

you pay in fi nance charges is the balance calculation method.

4. B. The federal Fair Credit Billing Act limits your liability for unauthorized use of your credit card to $50.

5. C. By co-signing a loan, you are agreeing to repay the loan if the

primary applicant defaults.



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