What is credit?
receiving funds either directly from a loan or indirectly from a credit card
What is principal?
the amount of money you borrow on charge on your credit card
What is interest as it relates to debt and credit?
interest is the cost of credit
When you buy something on credit what are you actually doing?
going into debt, you owe money.
What is installment debt?
payment over a time, fixed amounts
Consumer durables?
3 years or longer, pay for with installment debt
What is a mortgage?
a loan used to buy a house
Why do people use credit?
1) immediate use of a good or service
2) to spread the payment out over time while using the good or service
Reduce a monthly payment?
making a high down payment
Best guide to evaluate credit options?
APR
What do bankers do in times when loans are defaulted?
raise interest rates
what does a person do if they have multiple cards to pay off?
pay off the higher interest ones first
Creditor:
somebody you owe
Interest ceiling?
shortage of loans available
Postive aspects of credit?
great for emergency
very convenient to use
can make money
free money
build a credit history
Negative aspects of credit?
hardship, broke, foreclosure
What are the major credit cards we use?
Mastercard, Visa, American Express, Discover
What is a credit card?
device that allows a person to make purchases without paying
What is a debit card?
device to make cashless purchases, use your own money from a checking account.
What is APR?
Annual Percentage Rate- the cost of credit expressed as a yearly percentage.
As a consumer, what guideline does APR provide for you?
it is one of the first factors when considering credit
What is an ATM
Automated Teller Machine
What is Credit Bureau?
a private buisness that will provide credit checks for orginizations? considering lending money to an individual
What is Credit rating?
gives the lender an idea of the risk involved in loaning someone money
What is Credit Check?
investigation revealing income, debts and how debts are paid off.
What are the three types of charge accounts? Which type is most common?
Regular, Revolving, Installment
Revolving is the most common.
What is he credit card trade off?
interest
Secured loans?
loan that is backed by collateral
What are the 3 factors a lending institution would consider when determining if you should receive a loan?
short answer
Capacity to pay - do you have the income
Character - are you a good person
Collateral - car or house
Unsecured loans
loan guaranteed with a promise to pay
What is a co -signer?
someone who pays another persons debt as a legal obligation if not paid
Responsibility as a borrower?
to pay back the loan on time and in the full amount
What is usury?
to lend money at a high interest rate
What is bankruptcy?
legally being declared as unable to pay off debts with available income.
Truth in Lending Act?
the right to be fully informed about the costs and conditions of borrowing
Equal Credit opportunity act?
cant be discriminated against because of race, gender, religion, maritial status and sexual orientation
Fair Credit reporting Act
rights to accuracy of info, fairness in being treated by credit organization?s and privacy about your information
Cost of credit?
Interest
The relationship between the number of payments for a loan, the APR, total number of payments?
the more the payment amount is and the higher the APR is the bigger the total amount is.
What is finance charge?
cost of credit expressed in dollars and cents.
What factor contributes most to your FICO score
Payment History
The three credit bureaus?
SHORT ANSWER
Equifax, Expieran, TransUnion
Fico score rating range?
300 - 850