New Card Act Within Credit Card Laws - Essay Example

? New Card Act Credit Card Laws Task What is a credit score? According to Schultz , a credit score is the financial worthiness of an individual in numeric values. Lenders who estimate individuals’ worth using data from the score normally focus on the information on the score. In the United States, the score is used by security agencies when accessing and examining the financial records of citizens (Schultz, 2010). As a rule, the numeric information is presented in monetary terms at the national, State and communal level. The values of the score vary from 300 to 850, a score below 500 indicates a low risks. However, a higher score in the United States indicate that an individual is creditworthy. According to Riley (2008), the scores are presented in digits created based on algorithmic techniques. The difference in the score determines an individual’s access to credit from financial institutions. Consequently, most Americans aim at higher scores to enable them access financial services with ease. Concurrently, a person having a low score cannot access certain services that are essential to their livelihood. For instance, credit facilities assist people to meet their education and housing bills. “Where does it come from? What are the names of the three credit reporting agencies?” Consumers always obtain information on credit score from credit reporting agencies. According to the federal laws, citizens have the right to assess credit information (Angela, 2010). In the US, the FICO model indicates the score for individuals. Institutions in American prefer the model because it is reliable. It is estimated that close to 90 percent of financial institutions in America use FICO in presenting credit scores. The scores in FICO influences housing, education and employment of individuals in America as discussed in this piece. According to Riley (2012), bureaus provide information on credit scores at both the national and the county level. The reporting agencies in America are Equifax, Experian and TransUnion. Currently, consumers are exempted from using Experian, but it is still recognizable by institutions that use FICO. Equifax and TransUnion are used because they have extended agreements of providing services to the public. The two agencies relay information to clients through phones, the internet and mail. According to Arnold (2008), the agencies operate in accordance to the stipulations of the new acts that govern credit use in the US. How does it affect what a family can or cannot do? According to the new credit card laws, a score plays a fundamental role in the livelihood of Americans. For that reason, a person having a low score will be underprivileged according to the new Act (Schultz, 2010). For instance, the laws affect the financial capabilities of individuals in the states. Indeed, a person can be denied mortgage services for having scored lowly. Moreover, families with low scores will not be able to finance education for their members. However, the new laws have enhanced transparency in the issuance of credit facilities to low income households. Schultz (2010) notes that unemployed citizens can also apply for credit facilities in America. Credit services are widely used in the US because there are laws that safeguard creditors. Interestingly, the enactment of the new laws has increased the availability of credit to different people in the community. According to Angela (2010), the facilities are used in acquisition of health insurance and payment of medical bills. A part of the population in America depends on credit facilities for purchasing mortgages and other personal amenities. Therefore, denial of credit incapacitates those who desire to free themselves from debts. However, people with credit anomalies have to fix their records to meet the requirement of the new acts. This will aid in planning for the future needs for financial institutions (Arnold 2012). Moreover, laws have ensured that credit issuers do not manipulate creditors. Subsequently, the laws ensure accountability whereby lenders have to follow the right procedure in increasing rates. In addition, creditors are issued with notice when there are plans to reduce rates. For the new card act, authorized institutions will approve transactions. How might this affect family life differently based on a family’s social economic status? A family that fails to repay its credit will have their assets frozen by financial institutions (Riley, 2008). Moreover, the situation can be tough if one member of a family chooses to violate credit card laws. For instance, it is difficult to handle credit issues in cases when a person has filed for a divorce. However, individuals with good credit records will be rewarded through points. This develops a person’s reputation that would be instrumental when seeking employment at the national level. Wealthy families benefit more from the use of credit card facilities since they score highly on their credit record sheet. However, there are instances when have been affected by theft. Notably, high score enables the wealthy access credit services such as loans with ease (Silver-Greenberg, 2009). Contrary, the provision of the new laws allows for the extension of a credit period for the wealthy in times of difficulties. Moreover, wealthy individual who meet the minimum requirements for a credit can obtain covers that cushion them from bankruptcy. Discuss how identity theft plays into credit scores and the family Identity theft is a form of malpractice in which an individual personifies himself when using other people’s credit facilities. As a result, they taint the reputation of the credit card owner. A low rating in credit card score will reflect in the records of a person who has had his credit card used in fraud. This act is against the laws that govern the use of credit in all States (Valencia, 2006). In Georgia State, credit defaulters are supposed to report to the authority before they can be pardoned for violation of the law. People have reported cases when their account balance appeared more than their expenses. Fraudsters target clients by opening accounts without their notice. Later, they use the accounts to exaggerate balances of the victims by using credit facilities indiscriminately. This can lead to a delay in payment for the accounts of victims (Valencia, 2006). There are cases when financial institutions have blacklisted innocent individuals. Credit theft can also involve people making unnecessary inquiries that in the end affect the credit levels for families. According to Silver-Greenberg (2009), it is important to alert a credit-reporting agency about cases of fraud. Thereafter, the institutions will alter information of a client for security purposes. According to the new laws enacted by president Obama, a victim of fraud should continuously monitor the activity of agencies before embarking on using the recovered card. This is because there are cases when individuals have been denied employment opportunities based on their credit repayment record. Is understanding finances important for individuals? Families? Society? It is important for individuals to comprehend financial data to plan for their needs. Knowledge on finances aids in forecasting the future needs of individuals and companies (Croft, 2004). People who understand how credit institutions operate rarely fall into bankruptcy since they borrow selectively for their personal use. This makes it easier for individuals to conduct self evaluation to reduce their risks. Financial stability exists in societies where majority understands their responsibilities when using credit facilities (Croft, 2004). People should be keen on their spending because a miscalculated borrowing creates a financial deficit that leads a society to depression. Households that failed to estimate their financial needs attribute the recent economic downturn in the US to financial miscalculations. This can be reserved if the citizens cut on unnecessary spending that put them into debts; hence, citizens will borrow cautiously. How might the concept of “the American Dream” and homeownership effect a family’s view of financial success and stability? American dream connotes the state of actualization that most American desire. Normally it is associated with having accomplished individual goals. It also means being in the state of good health/ happiness. The dream entails the acquisition of homes and the attainment of financial stability whereby a person is free from debts (Pereira, 2007). Meaning that the person can meets his needs without the help of financial entities. Families that chase the dream are prone to risks that lead to debts in most circumstances. Therefore, a person chasing after the dream should avoid committing financial miscalculations and misjudgments. Individuals should be patient when seeking personal accomplishments to avoid destabilizing the society (Silver-Greenberg, 2009). They should avoid the rush of striving to attain financial stability. Moreover, people should not view success only in terms of material possessions. If so, why is financial understanding important? If not, why is financial understanding not important? Financial understanding is important because it empowers an individual to make wise decisions on issues regarding family finances (Trottman, 2008). Family members who are informed can liaise when taking credit to minimize the risks involved in using credit facilities. This is because financial laws are complicated and can mislead when they are not interpreted correctly. Financial stability means avoiding credit transactions to an informed person (Trottman, 2008). Financial stability to a country refers to the state when the citizens are free from debts. Additionally, the people can satisfy their basic needs such as accommodation. A person does not have to overburden himself when amassing wealth. Instead, people should live according to their means by cutting on expenses. A person’s expenditure is not supposed to exceed their earning. Conclusion A financially knowledgeable individual can understand the basic elements of credit score. The person can access their records prior to devising financial plans for meeting their needs on health, education, employment and housing (Lovley, 2007). An informed person will easily access financial information from financial institutions because he or she will be able to interpret the stipulations of the laws that govern credit use (Silver-Greenberg, 2009). However, understanding credit information is not important in cases where individual lacks the capacity to control their financial decisions in certain circumstances. References Angela, W. (2010).College credit. News week magazine. The daily beast. Retrieved from http://www.thedailybeast.com/newsweek/2010/09/18/how-students-can-build-credit-in-the-card-act-era.html Arnold, C. (2012). Card Act may have cost consumers billions. Forbes. Retrieved from: http://www.forbes.com/sites/moneybuilder/2012/02/21/card-act-may-have-cost-consumers-billions/ Croft, J. (2004). Credit card chief condemns bankruptcy change Enterprise Act: Financial Times. Retrieved from http://search.proquest.com/docview Lovley, E. (2007). Shoppers aren't swayed by credit-disclosure data. Wall Street Journal. Retrieved from http://search.proquest.com/docview/399014006?accountid=45049 Pereira, J. (2007). Breaking the code: How credit-card data went out wireless door; in biggest known theft, retailer's weak security lost millions of numbers. Wall Street Journal. Retrieved from http://search.proquest.com/docview/398993396?accountid=45049 Riley, A. (2008). State of md.'s credit card debt among highest in U.S. The Daily Record. Retrieved from http://search.proquest.com/docview/390083393?accountid=45049 Schultz, J. (2010). The Effects of the Credit Card Act. New York Times. Retrieved from http://bucks.blogs.nytimes.com/2010/07/22/the-effects-of-the-credit-card-act/ Silver-greenberg, J. (2009) Problems Riddle Moves to Collect Credit Card Debt. Dealbox Retrieved from http://dealbook.nytimes.com/2012/08/12/problems-riddle-moves-to-collect-credit-card-debt/ Trottman, M. (2008). U.S. news: Showdown looms over 'card check' union drives. Wall Street Journal. Retrieved from http://search.proquest.com/docview/399102032?accountid=45049 Valencia, M. J. (2006. Skimming `a new twist on old crime' ; credit card fraud goes high tech. Telegram & Gazette. Retrieved from http://search.proquest.com/docview/268950000?accountid=45049; Read More