INTRODUCTION

• Potentially Problem Financial Products
• Your Credit - Credit Reports and Scores
• Home Ownership: Mortgaes and Home-Equity Loans
• Foreclosure
• Avoiding Predatory Practices
• Buying a Car
• Track and Manage Your Money

Information from the U.S. Department of the Treasury's Office of Financial Education

You can make better decisions to improve your current and future financial health by understanding various financial products and services. The information on this web page can help you make smarter decisions and help you avoid becoming a victim of predatory lending practices and scams that cost you money.

This web page provides information and guidance to help you make better decisions, but ultimately, everyone needs to decide what is best for their circumstances. There are many different types of loans and different types of lenders.Some offer deals that may be right for some people in some cases, but not right for you. The best thing that you can do is know what you are getting into and whether you can afford it. That is how to Borrow Smart!

We have provided an overview and summary for each topic listed below. We also have provided several additional resources in the various sections of this web page — places where you can find more information.

Subject: Potentially Problem Financial Products

Some Financial Products to Watch Out For Borrow Smart -Be cautious before accepting these "deals"...

1. A Refund Anticipation Loan is a really high-interest, high-fee loan sometimes offered by your tax preparer. Be patient, unlike this taxpayer, Ava:

• Ava's tax preparer tells her she'll get a $2,000 refund but that it could take up to four weeks to get the money. To get the money today, Ava could pay:
• RAL Loan Fee = $75
• Administrative Filing Fee = $75
• Tax Preparation Fee = $100
  —> Total Fees = $250

That's more than 10 percent of her refund on fees she could avoid by waiting. If Ava had her refund direct deposited to her bank or credit union account, she would only wait about a week longer to get her money, but she would save $150 in fees — avoiding a loan with almost 400 percent annual interest!

2. Pawn shops accept personal property as collateral for loans based on the value of the goods. They lend you less than half of an item's resale value and give you several months to repay the loan and charge high interest rates until the loan is repaid. Many shops also charge storage costs and insurance fees. If the loan is not repaid, the pawn shop keeps the property and may sell it.

Bill is in a pawn-shop pickle: Bill decides to pawn a $200 ring at a shop for a $100 loan. After one month, he must repay the loan, with 5 percent interest and a 20 percent storage fee. That’s an Annual Percentage Rate (APR) of 300 percent!

Three things can happen after one month:

• Best result: Bill pays the $125 in full and gets the ring back.
• Not-so-good result: Bill pays the monthly storage fee ($20) and keeps the ring at the shop, which can charge interest in two ways: 5% on the amount that was due ($125), increasing the repayment amount to $131.25 (worse); charge 5% interest on the amount borrowed ($100) and add the new interest payment to the payment that was due, increasing the repayment amount to $130.
• Worst: Bill doesn't repay the loan and the shop keeps or sells the ring.

3. Rent-to-own services come from stores renting appliances, furniture and electronics. After the rental period ends, you own the goods. But if you miss a payment, the store will repossess the merchandise even if you've already paid more than what it’s worth!

Consider Yolanda...
... who is enticed by an ad that says, "Get a brand-new living room set for only $10 a week!"
Here’s the real deal:

1. Rent-to-own price: $10/week for 72 weeks = $720
2. Purchase price: $300

Stores with rent-to-own financing services must list the rent-to-own total price and the total purchase price. If Yolanda enrolls in the "rent-to-own" program, she’ll pay more than double the cost of the living room set. Instead, Yolanda should shop around for lower cost furniture if she really needs it.

4. Cash advances may seem like an easy way to get quick cash, but these loans can cost in excess of 20 percent interest. Fees are steep: 2 to 5 percent of the amount borrowed.

Maurice thought...
... $200 in immediate cash (available easily) would pay for a pleasant dinner and show with his wife, so he took an advance on his credit card, along with a 4% fee. Maurice’s bill will say: Pay $208, plus $40 in interest or $248.

5. Many checking accounts offer overdraft protection that enables you to draw money from your account, even if your account balance is $0. Overdraft fees average $30 or $35. That might seem small, but multiple overdrafts add up quickly. To avoid overdrafts, ask your bank to tap into your savings account balance when you go over your checking balance.

This is usually better than an overdraft charge.

As Juanita will learn…

Juanita has $300 in her checking account and writes a check for $400 to buy some new clothes. Her overdraft protection enables her bank to make the payment and charge her $30 for the transaction. Now Juanita owes the bank $130 for not having the $100 extra in her checking account.

6. Payday loans usually are small-dollar, short-term, unsecured loans that borrowers promise to repay out of their next paycheck. All you need to do to get a loan is provide the lender with a check or debit authorization for the amount of your loan plus the finance charge.

Because the loans are so short, the lender charges a fixed fee (finance charge), rather than an interest rate. When this fee is calculated as an annual percentage rate (APR), the cost of borrowing can range from 400 percent to 1,000 percent, or more.

As Winston discovered…

Winston needed to go out of town to visit a family member before his next payday. The airfare is $400, which is more than Winston has saved, so he takes out a $400 payday loan to buy the ticket. The loan required that Winston pay off the loan within 14 days and came with a fee of $74.48. However, the lender would not refund any portion of the fee if Winston paid the debt off early. This means that if Winston pays off the loan within:

• 7 days, when he gets paid, the APR for his loan is 970.90%.
• 14 days, the APR for his loan is 485.45%

If Winston cannot repay the loan on time, the loan is "rolled over" for another two weeks with an additional fee of $74.48. He has already spent $74.48 to borrow $400. Now his cost of borrowing has increased to $148.96 and he is not out of debt yet. He now owes $548.96 ($400 + $148.96), and his APR continues to climb

Many payday loans can wind up keeping the borrower in debt for a long time, due to rolling over loans and taking out new payday loans to pay off old ones.

Alternatives to Potential Problem Products:
Many credit unions and some banks can provide you with a loan or line-of-credit (such as a credit card) to meet your short-term cash needs on a reasonable basis. Ask at your bank or credit union. If you don’t currently have a bank or credit union account, consider opening one.

There are many internet resources that will help you shop for a bank or credit union. To see if your financial institution is insured, go to:

• banks: http://www2.fdic.gov/idasp/main_bankfind.asp
• credit unions: http://www.ncua.gov/indexdata.html

Resources

Another Loan to Watch Out For — Reverse Mortgages What Is a Reverse Mortgage?

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month.

You typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

Most reverse mortgages require no repayment for as long as you — or any co-owner(s) — live in the home. So they differ from other home loans in these important ways:

• you don't need an income to qualify for a reverse mortgage; and
• you don't have to make monthly repayments on a reverse mortgage.

Because of the unusual nature of reverse mortgages, it is a good idea to get counseling before considering one.Contact a HUD-approved counseling agency to help you decide if a reverse mortgage is right for you. You can contact Clearinghouse at 1-800- 569-4287 or visit http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?filtersvc=hec&filtermultistate=yes

Subject: Your Credit — Credit Reports and Scores Your Credit Report: The First Step toward Obtaining Credit What Is FACTA?

The Fair and Accurate Credit Transactions Act (FACTA) became law in 2003.It gives consumers rights to obtain free credit reports.

In brief, a credit report summarizes your credit history and gives reasons why you have a particular credit score.Your credit score tells a lender, at a glance, how credit-worthy you are. Under federal law, you may obtain one free copy of your credit report from each of the three major credit bureaus every 12 months.The law also requires the three major credit bureaus to provide a single point of contact, so you can request your reports from all three companies with one toll-free phone call, letter or Internet visit. Once you have filled out certain information at www.annualcreditreport.com/cra/index.jsp, you will be directed to individual websites operated by the three nationwide consumer reporting companies.

Here are some important items to know about how companies calculate and use your credit score to determine whether you get credit, how much and at what interest rate:

• When you apply for credit - whether for a credit card, a car loan, or a mortgage — lenders want to know what risk they would take by loaning money to you.
• The credit score (such as a FICO score) summarizes your credit history to show lenders your statistical likelihood of repaying loans on time.
• Different credit bureaus may have different scores. Lenders may use one or all of these scores to make loan determinations.
• As your payment history changes over time, your credit scores tend to change as well.
• Taking steps to raise your credit scores can help you qualify for better rates from lenders.

Your credit score usually is based on the answers to these questions:

• Do you pay your bills on time? The answer to this question is very important.If you have paid bills late or have had an account referred to a collection agency this history will show up in your credit report.Declaring bankruptcy will show in your credit report for up to 10 years.
• What is your outstanding debt? Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.
• How long is your credit history? A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.
• Have you applied for new credit recently? If you have applied for too many new accounts recently, your score may be negatively affected.However, if you request a copy of your own credit report, or if creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.
• How many and what types of credit accounts do you have? Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.

Checking your credit reports is the best free way to get an accurate picture of how lenders see you.Go to You also can call 1-877-322-8228; or complete the Annual Credit Report Request form online at www.ftc.gov/bcp/conline/include/requestformfinal.pdf (PDF 40 KB), then mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

The Federal Trade Commission's "Building a Better Credit Report" has information on correcting errors in your report, tips on dealing with debt and avoiding scams — and more, http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm. While fixing mistakes is important, correcting an error in your credit report doesn't necessarily improve your credit score.

Beware of credit-repair scams: Usually doing it yourself is the best way to repair your credit. The Federal Trade Commission's "Credit Repair: How to Help Yourself," explains how you can improve your creditworthiness and lists legitimate resources for low-cost or no-cost help,http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm.

Subject: Home Ownership: Mortgages and Home-Equity Loans

Shop for the Best Mortgage TIP: Terms & Interest Are Often Negotiable

Shopping around for a home loan or mortgage will help you to get the best financing deal. The price and terms of a home loan — whether it's a home purchase mortgage, a refinancing, or a home equity loan —are negotiable, and you need to agree to them before entering the deal. You'll want to compare all the costs involved in obtaining a mortgage. You may save thousands of dollars by shopping, comparing and negotiating with your lender.

Home loans are available from several types of lenders: commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you're getting the best price. You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you.

Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions operate as both lenders and brokers. And most brokers' advertisements do not use the word "broker." Therefore, be sure to ask whether a broker is involved. A broker's access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Consequently, you should consider contacting more than one broker, and shop around, just as you should with any service.

Brokers are usually paid a fee for their services that may be separate from and in addition to the lender's origination or other fees. A broker's compensation may be in the form of "points" paid at closing or as an add-on to your interest rate, or both.

Obtain All Important Cost Information

Know how much of a down payment you can afford, and find out all the costs involved in the loan. Knowing just the amount of the monthly payment or the interest rate is not enough. Ask for information about the same loan amount, loan term, and type of loan so that you can compare the information.

Get the following important information from each lender and broker:

Rates fluctuate with the market, and can vary from lender to lender.

• Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
• Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment.
• If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down.
• Ask about the loan's annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees and certain other credit charges that you may be required to pay, expressed as a yearly rate.

Points are fees paid to the lender or broker for the loan and are often linked to the interest rate. Usually the more points you pay, the lower the rate. Check your local newspaper for information about rates and points currently being offered. Ask for points to be quoted to you as a dollar amount — rather than just as the number of points — so that you will actually know how much you will have to pay.

A home loan often involves fees, such as loan origination or underwriting fees, broker fees, and transaction, settlement and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many fees are negotiable. Some are paid when you apply for loan (such as application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. "No-cost" loans are sometimes available, but they usually involve higher rates.

Ask for an explanation of any fee you do not understand. Some common fees associated with a home loan closing are found on the Federal Reserve's Mortgage Shopping Worksheet, http://www.federalreserve.gov/pubs/mortgage/mortb_1.htm#head8.

Down Payments and Private Mortgage Insurance

Some lenders require no money down, while others charge as much as 20 percent of the home's purchase price as a down payment. Low down payments usually mean borrowers have to buy private mortgage insurance, to protect the lender in case the home buyer fails to pay.

Your down payment requirements may be substantially smaller when government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development programs are available.

Once you know what each lender has to offer, negotiate for the best deal that you can.

Have the lender or broker write down all the costs associated with the loan. Then ask if the lender or broker will waive or reduce one or more of its fees, or agree to a lower rate or fewer points.

Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the loan rate. This fee may be refundable at closing.

Whether you have credit problems or not, it's a good idea to review your credit report for accuracy and completeness before you apply for a loan.

Go to www.annualcreditreport.com/cra/index.jsp, which is the only authorized online source for a free credit report. Under federal law, consumers can get a free report from each of the three national credit reporting companies every 12 months.

You also can call 1-877-322-8228; or complete the Annual Credit Report Request form online at www.ftc.gov/bcp/conline/include/requestformfinal.pdf, then mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Mortgage Shopping Worksheet:

A checklist for comparing mortgages can be found at: http://www.federalreserve.gov/pubs/mortgage/mortb_1.htm#head8.

Home Equity Loan Red Flags

Watch out for home equity loan offers that do the following:

• Convince homeowners to refinance over and over with little benefit to the homeowner.
• Pressure homeowners into making home improvements they can't afford and then charges them high rates to make a loan to cover the home improvements.
• Pressure borrowers to act quickly, without providing full details or giving borrowers enough time to read and understand the documents given.
• Request the borrower to send money or bank account information before a promised product or service is delivered.
• Pressure the homeowner to quickly say "yes" to a proposal, especially a phone or in-person offer to sell you financial products, household equipment or home repairs that you may not really need.
• Ask the borrower to write checks or send money to unknown individuals or businesses.

Subject: Foreclosure

Note: The information about foreclosure is rapidly changing. Please check the links provided and the resource section for the latest information.

Prioritize your spending.

• Review your finances and see where you can cut spending in order to make your mortgage payment.
• Look for optional expenses — for instance: cable TV, memberships, entertainment — that you can eliminate.

Liquidate other assets. Do you have assets — for instance: a second car, ore jewelry, that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.  

If you are unable to make your mortgage payment, don't ignore the problem! The further behind you become, the harder it will be to reinstate your loan and the more likely it is that you will lose your house.

Contact your lender as soon as you realize that you have a problem. Lenders don't want your house.They have options to help borrowers through difficult financial times.  One way to contact your lender is through Hope Now, an alliance between HUD approved counseling agents, servicers, investors and other mortgage market participants that provides free foreclosure prevention assistance. Call 1-888-995-HOPE (4673).

Open and respond to all mail from your lender. The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems.  Later mail may include important notice of pending legal action.  Your failure to open the mail will not be an excuse in foreclosure court.

If You Have Fallen Behind on Your Mortgage Payments

If you have fallen behind on your payments, consider discussing the following foreclosure prevention options with your loan servicer:

• Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem paying your mortgage is temporary.
• Repayment plan: Your servicer gives you a fixed amount of time to repay the amount for which you are behind by adding a portion of the past due amount to your regular payment. This option may be appropriate if you've missed a small number of payments.
• Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments — as well as a lump sum payment or additional partial payments — for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn't going to help you if you've purchased a home you can't afford.
• Loan modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving, or cancelling, a portion of the mortgage debt. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. For more information, see www.irs.gov. A loan modification may be necessary if you are facing a long-term reduction in your income or increased payments on an ARM.
  
  Before you ask for forbearance or a loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage. For example, if you can show that you've reduced other expenses, your loan servicer may be more likely to negotiate with you.
• Selling your home: Depending on the real estate market in your area, selling your home may provide the funds you need to pay off your current mortgage debt in full.
• Bankruptcy: Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to get credit, buy another home, get life insurance, or sometimes, get a job. Still, it is a legal procedure that can offer a fresh start for people who can't satisfy their debts.
  
  If you and your loan servicer cannot agree on a repayment plan or other remedy, you may want to investigate filing Chapter 13 bankruptcy. If you have a regular income, Chapter 13 may allow you to keep property, like a mortgaged house or car that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income toward payment of your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of certain debts.

To learn more about Chapter 13, visit www.usdoj.gov/ust/; it's the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that oversees bankruptcy cases and trustees.

If you have a mortgage through the Federal Housing Administration (FHA) or Veterans Administration (VA), you may have other foreclosure alternatives. Contact the FHA, portal.hud.gov/, or VA, www.homeloans.va.gov, to talk about them.

Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the Federal Housing Administration's (FHA's) "At Home with FHA" site, http://portal.hud.gov/portal/page?_pageid=33,717348&_dad=portal&_schema=PORTAL.

The U.S. Department of Housing and Urban Development (HUD) funds free or very low-cost housing counseling nationwide.  Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. To find a HUD-approved housing counselor near you, visit http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm; or call (800) 569-4287, TTY: (800) 877-8339.

In 2008, Congress created Hope for Homeowners (H4H) to help those at risk of foreclosure stay in their homes. A key to the program is you working with your lender. For more information, which is updated frequently, see the following web site: http://portal.hud.gov/portal/page?_pageid=73,7601299&_dad=portal&_schema=PORTAL

You don't need to pay big fees for foreclosure prevention help! Use that money to pay the mortgage instead! Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services that either your lender or a HUD approved housing counselor will provide free, if you contact them.

Don't sign over your house! If any firm claims they can stop your foreclosure immediately, if you sign a document appointing them to act on your behalf, you could be signing over the title to your property.This makes you a renter in your own home!

Never sign any legal document without reading and understanding all the terms. Consider getting professional advice from either:

• an attorney,
• a trusted real estate professional,
• or a HUD approved housing counselor.

Subject: Avoiding Predatory Practices

Consumers need to shop for loans with the same effort they use when they decide to buy a big-ticket item. Your goal is to get the best deal possible, which means:

• Obtaining the lowest interest rate,
• Negotiating the shortest terms — the length of loan repayment period, and
• Avoiding unnecessary fees.

It may take time to do the research.But if you don't borrow smart, you may be paying the cost for a long time. Be smart, and be wary of anyone offering you a "too good to be true" deal.

• Whenever possible, deal only with lenders and businesses you know and trust.
• If you don't know the lender or the business, don't sign anything until you check them out. (Call the Better Business Bureau, your state attorney general's office, or your local or state consumer protection office.)

Some lenders take advantage of borrowers by:

• Encouraging them to sell property for more than it's worth by using phony appraisals.
• "Stripping" homeowners' equity from their homes by convincing them to refinance over and over, when there's no benefit for doing so.
• Pressuring homeowners into making home improvements they can't afford and then charging them high rates on loans to pay for the improvements.
• Encouraging borrowers to lie about their income.
• Lending more money than a borrower can pay back.
• Charging high interest rates based on race or ethnicity, not credit history.
• Charging different fees for different items, which may be unnecessary or made-up.
• Pressuring borrowers to act quickly, without providing full details.
• Stealing your identity.

• Unsolicited offers from strangers or unfamiliar companies that sound too good to be true.
• Requests to send money or bank account information before a promised product or service is delivered.
• Pressure to quickly say "yes" to a proposal, especially an oral offer to sell you financial products, household equipment or home repairs that you may not really need.
• Indications of cash shortages when you should have enough money coming in.
• Checks payable to unfamiliar people or businesses.
• A lender who only talks about the benefits of taking a loan and not your costs.
• A lender who does not give you full information, or enough time to read the information.

Identity Theft and Phishing — Is That Message Really from Your Bank?

Phishing is a scam where Internet fraudsters send spam or pop-up messages to lure unsuspecting victims to disclose their personal and financial information. Some scammers send an e-mail that appears to be from a legitimate bank or business. These messages ask recipients to reply to the e-mail or call a phone number to update their accounts or access a "refund." Don't do it!

• Don't reply to e-mail or pop-up messages that ask for personal or financial information, and don't click on links inside the message.
• Use anti-virus and anti-spyware software, as well as a firewall, and update them all regularly.
• Don't e-mail personal or financial information.
• Review credit card and account statements as soon as you receive them to check for unauthorized charges.
• Be cautious about opening any attachment or downloading any files from e-mails you receive, regardless of who sent them.
• Forward phishing e-mails to spam@uce.gov – and to the company, bank, or organization impersonated in the phishing email.
• If you've been scammed, visit the Federal Trade Commission's Identity Theft Web site at http://www.ftc.gov for more information on what to do.
• To learn more about how to avoid spam scams and reduce the clutter in your in-box, check out www.ftc.gov/spam.

• Contact a major credit bureau to place a fraud alert on your credit file: Equifax, 1-800-525-6285; Experian, 1-888-397-3742; TransUnion, 1-800-680-7289. Ask for a "fraud alert" to be placed on your credit file. You only need to contact one of the three. The credit bureau you contact will transmit your request to the other two.
• Call your financial institutions — especially if you suspect that an identity theft has accessed your accounts.
• Ask your financial institution if you should close or place passwords on those accounts, and then open new accounts.
• File a complaint with the FTC on the Federal Trade Commission's Web site at http://www.ftc.gov/bcp/edu/microsites/idtheft/ or by calling toll-free 1-877-IDTHEFT (438-4338). If you file on line, print out the report and take it to your local police department.
• Call your local police to fill out the necessary crime reports. Make sure to bring a copy of your FTC complaint with you.

Subject: Buying a Car

Before zeroing in on the vehicle you want to buy — new or used — it pays to have your financing already in place. You have several places for borrowing money:

• Brick-and-Mortar Banks and Credit Unions. You can get an auto loan from a bank, credit union or another financial institution. These sources of financing usually will offer the lowest rates you'll find — with credit unions generally offering lower rates than banks. If you know you want to buy a car, talk to your financial institution and have your loan approved before you ever hit the showroom.
• Online Lenders. In recent years, Internet-only finance companies have sprung up, offering very attractive rates and contract lengths. These loans can be handled entirely on the Web, putting a buyer's check in your hand in just a few days, which you can use at a dealership or for a private-party purchase.
• Family Help. If financing is a stretch, your family may loan you money or co-sign for a loan. If they do, make sure all parties are fully aware of every detail of the loan and the possibilities — should your circumstances change or things go wrong.
• Dealer/Manufacturer. As a general rule, dealer/manufacturer financing will cost you more, but you may find exceptions. And those zero-percent deals often cost more than you realize because sometimes they require "dealer participation," which means the dealer is likely to raise the price of the vehicle.

The best way to know what your exact costs will be is to first negotiate the price of the vehicle as though you're paying cash or have outside financing. Once those details are firm, tell the dealer what you've already secured (the length of loan and interest rate).Then ask the dealer if he/she can beat it.

Keep in mind that interest rates for new cars are lower than rates for used vehicles.In general, new cars also can be financed over longer terms than used ones. In many cases, this equation can make a new car cheaper — on a monthly basis — than a used one.

You can look on the internet to find some cost calculators that can help you estimate costs.

Here are some important items to know about how companies calculate and use your credit score to determine whether you get credit, how much and at what interest rate:

• When you apply for credit — whether for a credit card, a car loan, or a mortgage — lenders want to know what risk they would take by loaning money to you.
• The credit score (such as a FICO score) summarizes your credit history to show lenders your statistical likelihood of repaying loans on time.
• Different credit bureaus may have different scores. Lenders may use one or all of these scores to make loan determinations.
• As your payment history changes over time, your credit scores tend to change as well.
• Taking steps to raise your credit scores can help you qualify for better rates from lenders.

Checking your credit reports is the best free way to get an accurate picture of how lenders see you. Go to www.annualcreditreport.com/cra/index.jsp, which is the only authorized online source for a free credit report. Under federal law, consumers can get a free report from each of the three national credit reporting companies every 12 months.

You also can a call 877-322-8228; or complete the Annual Credit Report Request Form online at www.ftc.gov/bcp/conline/include/requestformfinal.pdf (PDF 40 KB), and then mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

If your payments are late or you default on your contract in any way, your creditor — the one giving you your car loan — or lessor — the one leasing you your vehicle — may have the right to repossess your car. The FTC has provided a publication, "Vehicle Repossession: Understanding the Rules of the Road," where you can learn what repossession may mean to you, http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut14.shtm.

Subject: Track and Manage Your Money There's Help Out There

Tracking your money is a helpful way to manage your funds on a daily basis, save for future expenses, and be able to pay down debt. If you're not sure where to begin, many government resources can help you figure out how to track your money.

The following tips are from the "Money Smart" curriculum, a free financial education program developed by the Federal Deposit Insurance Corporation (FDIC).

• In a notebook, list all of your sources of income (paychecks, child support, etc.) and all of your expenses for a month.
• Divide the expenses into two categories: fixed and flexible
  • Fixed expenses include rent/mortgage, utility bills if you're on a budget plan, and regular recurring expenses like child care or elder care.
  • Flexible expenses include dining out and entertainment.

• To reduce your expenses, track every outgoing penny and decide what you can do without. Things like candy and cups of coffee can add up. If eliminated, you can put that money into a savings account.
• It's more economical to shop at grocery stores than at convenience stores.Take your lunch to work rather than eating out.
• Once you've developed a budget, stick to it, but revisit it when changes occur, like a raise in pay or a spike in gas prices.
• Find out if you are eligible for the Earned Income Tax Credit.
• If you are getting a tax refund, allow it to be deposited directly into a checking or savings account.

Actually, consider opening at least two accounts, one for checking to pay your bills and one for saving to pay yourself.

• Go to one of three types of financial institutions: a bank, savings & loan or credit union.
• These three financial institutions are the safest because their deposits are insured by government agencies.
• Shop around for institutions that charge little or no fees and have reasonable minimum requirements, convenient ATMs, and other services that you want.There are a number of resources on the Internet that can help you comparison shop.
• In comparing savings accounts, go with the insured account that has the highest Annual Percentage Yield (APY).
• Look for checking accounts with no or low monthly fees, a low-minimum balance and opening balance requirement, and low fees for writing checks, buying money orders, and the other services that you will use.
• If you have a job or get a regular government check, get direct deposit.This sends your check directly into your account, saving you the cost of check cashing and worries about your check being late or stolen.
• Ask your bank or credit union to put some of your check into savings so that you can earn interest.

• Interest in savings accounts compounds over time, so any amount saved is good.
• Once you pay off a car loan or other loan, keep setting aside the amount of that payment in a savings account.
• Save at least two to six months worth of income in an insured savings account for emergencies.
• Consider your future and invest some money in retirement accounts like Individual Retirement Accounts, 401 (k) accounts and the like.

Make sure to contact your creditors (such as your mortgage company, car lender, or credit card company) immediately if you won't be able to pay.Explain why, and you may be able to work out a modified payment plan. Don't wait until your account is turned over to a debt collector.

You may want to obtain credit counseling from a reputable credit counselor.A credit counselor can also assist you with a debt management plan to help you pay your bills on time, and possibly consolidate or reduce those loans that you can't pay. A wide range of organizations provide this service, in person, by phone and by internet. Some charge you a lot, and others don't, so look around.

Be wary of credit counseling organizations that:

• charge high up-front or monthly fees for enrolling in credit counseling or a debt management plan (DMP).
• pressure you to make "voluntary contributions," another name for fees.
• won't send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances.
• try to enroll you in a DMP without spending time reviewing your financial situation.
• offer to enroll you in a DMP without teaching you budgeting and money management skills.
• demand that you make payments into a DMP before your creditors have accepted you into the program.