Identification of top five fundamentals for management of personal credit.

The Treasury Department and the Federal Reserve Board on August 13, 2003, announced the top five fundamental practices that consumers should follow to manage their personal credit.

During a May 22, 2003, credit management panel discussion hosted by the Treasury and the Federal Reserve and attended by representatives of financial services organizations and community and consumer groups, consensus was reached on the following five fundamental practices:

1. Build savings to avoid high-cost debt and improve payment options.

2. Pay bills on time.

3. Pay more than the minimum payment.

4. Comparison shop for credit and obtain only the credit you need.

5. Understand your credit history and how it affects you.

"These fundamentals are an important first step toward educating all Americans about the importance of responsible credit management," said Treasury Assistant Secretary for Financial Institutions Wayne A. Abernathy. "Wise management of personal credit is vitally important to reaching goals such as home ownership, higher education, and small business development."

"Credit must be managed carefully and these concepts offer guidance on how to do so," said Federal Reserve Board Governor Edward M. Gramlich. "The fundamentals of money management can help people make smart decisions that promote their own well-being and, on a broader scale, foster a more efficient economy."

Participants in the May 22 panel discussion, chaired by Assistant Secretary Abernathy and Governor Gramlich, included representatives from the National Foundation for Credit Counseling, the Association for Financial Counseling and Planning Education, the In-Charge Institute, the American Bankers Association, America's Community Bankers, the Credit Union National Association, the Fannie Mae Foundation, Freddie Mac, American Express, MasterCard, Visa, the Community Financial Services Association of America, the Consumer Federation of America, the National Council of La Raza, AARP, and College Parents of America.

The issue of credit management is one of four areas of focus for the Treasury Department's Office of Financial Education (OFE), established in 2002. The OFE works to promote access to financial education programs so that Americans obtain the practical knowledge and skills that will enable them to make informed financial choices throughout their lives. The OFE chairs the Federal Government Financial Education Coordinating Group.

As the agency with responsibility for the Truth in Lending Act regulations, the Federal Reserve has worked to promote access to credit and fair lending for underserved consumers and communities. In 2000, the Federal Reserve hosted a discussion on best practices in consumer credit education, and through its web site and consumer education materials is working to ensure that consumers know their rights and responsibilities in credit transactions.