Q: How do I get a good credit rating?

A: There are a number of ways, including having a savings account, buying low-priced items on time, getting a job and using credit cards. A credit rating is supposed to measure your ability to repay a debt. You can show that you are a good credit risk by developing a record of completing payments or by showing a stable income or other sources of money.

Q: How long does it take to clear up a bad credit report?

A: It depends on how serious your past problems were, how much money you want now, and what you want it for. Credit reporting agencies often want references on your loans and employment for the past five years. You can probably get around a bad credit rating if you can offer enough collateral for the present loan.

Q: What is collateral?

A: Collateral is anything of value that you can give as security for a loan. The lender wants you to name property that has a value at least equal to the amount of the loan. If you are unable to repay the loan, the lender may be able to take your collateral and sell it to help pay off your debt.

Q: What if I buy a TV or stereo on installments and have problems getting it fixed? If the store refuses to fix the set, can I refuse to make payments?

A: It depends. You may be able to stop payment if the financing was arranged at the store, depending on the terms in the agreement. If not, then you will probably have to keep paying. Generally, you cannot quit making payments required by an auto finance agreement even if the car is defective, wrecked, stolen or totaled.

Q: If I buy something with a high interest rate loan and later have money to pay off the loan, must I pay the entire amount of interest that would have been due over the term of the original contract?

A: No. You have a right to prepay a loan for consumer goods at any time without penalty.

Q: Can a purchase contract say that if I don’t pay the store can automatically get its money from my wages?

A: No. The store can only garnish your wages after suing you and getting a judgment.

Q: Can the purchase contract say that if I default, I agree to sign over my wages to the store?

A: Yes, but there are limitations on wage assignment. They can be canceled at any time by you, and they have a limited term, usually no more than one year.

Q: Can a lender have different rules for making loans to women than to men?

A: No. No lender can discriminate against anyone based on sex, race, or marital status. Lenders may only make distinctions based on your credit-worthiness. Married people with no outside job might have problems getting a loan unless they have enough collateral. In that case, your spouse could guarantee the loan or provide other security to support it.

To download the full Becoming a Legal Adult Booklet, please click here.