Credit Literacy for a Young Person You Love

Generally our focus is on commercial debt and commercial transactions; however in this issue we will be discussing credit and financial literacy for high school students.  Take this home and have a discussion with your own children or someone you care about.

Some of our community involvement activities centre on personal credit issues. We provide a credit seminar to local high schools. It is part of the Career and Life Management program (CALM).  There is only a paragraph dedicated to credit and its use in the textbooks. As older consumers will attest, there is much more to be learned about the subject and it would be great if it didn’t have to be learned the hard way!

Here is the seminar outline that we use:

Credit is defined as: confidence in a purchasers ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.

Examples of credit: cell phones, gym memberships, library cards, student loans, Visa, MasterCard, store credit cards, utilities.

How do you get credit? 1) Capacity – Cash Flow (job)

                                       2) Character – Attitude

                                       3) Credit worthiness – Payment habits

                                       4) Conditions – Layoffs (bad economy)

Cost of Credit:

Examples of common credit issues: roommates, cellphone bill, gym membership

How long do I have to fix the problem? Generally 90 days to pay all arrears.

Collection Agencies – What happens if I don’t pay?

Bankruptcy – A Credit “Mulligan”

Budgeting - Importance

Q & A

It has been our experience that gym memberships, cell phones, and roommates are the most common reasons a young person will have credit troubles. Have this conversation with the young person and explain to them the responsible use of credit and how it will either help or hinder them in the not too distant future. A great credit rating opens up many possibilities whereas a poor one can hold you back for a long time

Priority Credit Recovery Inc. and Account Adjustment Bureau save US Producer with Innovative Solution.

PCR received a collection account from one of their Multi-National Canadian clients for over $100K against a USA Producer.  PCR engaged their USA subsidiary Account Adjustment Bureau. The documentation consisted only of invoices, a name and number.

An investigation was conducted; the debtor was contacted who admitted to receiving and selling the product. There was no dispute. They cited poor financial planning and cost overruns as the cause for non-payment. They could not pay and legal action appeared to be the only recourse. It was clear to PCR/AAB the debtor needed to restructure, increase profitability by lowering production costs, plus they needed better equipment.

A solution was proposed by PCR/AAB and accepted by the client and debtor. PCR/ AAB drafted a loan agreement, incorporated Personal and Corporate Guarantees, interest and a fee structure for the service. The debtor converted the payable to a term loan, which enabled them restructure, obtain capital financing, increase profitability and expand their market share. The client converted the receivable to an investment asset and continues to do business on a COD basis.

The supplier and producer continue to have a mutually profitable relationship. USA/Canadian International Relations improved with this innovative solution proposed by highly trained professionals who went outside the box.  

This example is proof that PCR/AAB professionals look beyond the obvious when collecting a debt.