personal finance chapter 9
The amount of interest that Salinda will pay over the course of the first year is $251.25
1,340 x .1875
Noninstallment credit is typically
30 days or less
Brandy had trouble getting credit because she had never applied for credit and she had no ———-
Credit history
Jonathan asked that his ——— be increased on his credit card to $500
Credit limit
Dustin requested his ——- from trans union, which is a ———-
Credit report, credit bureau
What factors determine your credit score?
Credit scores are calculated about 35 percent based on your credit history, 30 percent based on how much of your available credit you are using, and the rest based on other information contained in your credit report.
Sebastian wanted to apply for ———- to get his new guitar, but the ———- rate was high
Credit, interest
The ———- to whom Elizabeth owes money for her credit purchases is Macys.
Creditor
The Equal Credit Opportunity Act prohibits creditors from denying credit for what reasons?
Creditors cannot deny credit for gender, age, race, national origin, religion, or marital status.
What three types of information do creditors use to determine a prospective borrower's creditworthiness?
Creditors use credit history, income, and amount of current debt.
Installment loans are usually to buy
Furniture, cars, boats, NOT gas
Credit is advantageous because
It helps us make large purchases sooner than we could if using cash
Installment loans typically require the borrower to make payment every —-
Month
Ebony saw the ad for 30 days same as cash and thought this option would work well for her. This type of credit in which monthly or weekly payments may not be required is known as———
Noninstallment credit
Under what conditions might a consumer find each type useful?
Noninstallment would be useful if someone is expecting to have cash soon; installment is useful for larger purchases; revolving open-end credit is useful in situations where a person wants to pay one bill rather than multiple bills—for example, for buying gas regularly.
Since lenders are careful who they loan to, why do you think so many people get into credit trouble?
Not all lenders have the individual's best interest in mind. Ultimately, an individual is responsible for monitoring his or her financial situation.
Credit cards are an example of ———-
Revolving open end credit
Of the three types of credit, which do you think poses the greatest threat to your financial future, and why?
Revolving open-end credit poses the greatest threat because it has the potential to get out of control without a person realizing how oppressive it has become.
Claude worried that someone was ——- when he was getting money at the ATM
Shoulder surfing
common identity theft tactics
Shoulder surfing Pretexting Phishing
Dwights mother was a victim of ——— when a hotel employee copied her credit card number during her last business trip
Skimming
Why might someone be willing to pay interest on a purchase rather than pay it all in cash?
The person might want to be able to conserve cash for other purposes.
Jeremiah borrowed $1,670 from the bank to buy a home entertainment system. How much will he have to pay back in 7 months assuming the annual interest rate is 8.99% and he intends to pay the loan in full?
yearly interest rate/number of months in a year 8.99/12 = .749% debt balance x monthly interest rate x number of months of financing $87.56 principal + interest
Disadvantages of credit
—Credit makes it easy to borrow too much money —Credit makes unwise purchases too easy —Some credit carries extremely high interest rates
What are some advantages and disadvantages of using credit?
Advantages include buying things that one might not be able to buy if one had to pay for it all at once; and also cash management. Disadvantages include cost and risk to one's financial future.
Why do you think it is important or helpful to know the reasons you have been denied credit?
By knowing why you have been denied credit, you can correct flaws and create a better application next time.
The ——— makes sure that your personal credit information only becomes available to firms legally allowed to access your information
Federal credit bureau
Luther knew that creditors could not deny him credit based on his ethnicity or race because of the ———-
Equal credit act
Three primary credit bureaus
Equifax, Experian, TransUnion
Kenzie knows he has a good ——- because he saw his credit report. This score is based on a model created by ———
FICO
Bryan was a victim of ——— when someone opened up a credit account in her name
Identity theft
What is identity theft?
Identity theft is the stealing of your identity in order to profit from it.
What are the six major areas of information that may be included on your credit report?
Information may include identifying information about the report, identifying information about the applicant, public record information, information on unpaid accounts, information on all other accounts, and information about people who have inquired about the applicant's credit.
Brandys father explained that the loan on her car was a type of ——— and that her payments would be due every month on the same date until her loan was paid off
Installment credit
Three main categories of credit
Installment credit, noninstallment credit, revolving open end credit
What is interest?
Interest is the cost of borrowing money.
Bryce was trying to purchase music online when he was redirected to a site that appeared to be official but that he soon discovered was not. He was about to be a victim of ———-
Pharming
Kaitlin received an email that appeared to be from her bank requesting that she verify account information. This type of fraud is called——-
Phishing
Pretexting that occurs online is ——
Phishing
Someone called Cecile to get her personal ID for her bank account. She may have been a victim of———
Pretexting
Cody had $500 showing as his ——- left on the loan
Principal
Credit reports contain ——-
Records of late payments History of default Bankruptcy history NOT medical records
Why is it important to check the information on your credit report regularly?
Sometimes incorrect and harmful information makes its way into your credit report.
Name and explain at least three tactics used by identity thieves to obtain information.
Tactics include skimming, which is copying credit information; phishing, which is an online version of pretexting, in which an ID thief obtains your personal information on some phony pretext; and pharming, which is the use of viruses to redirect users to phony sites.
How do you think technology has affected the problem of identity theft?
Technology has made it easier for people to access and make use of personal information.
Salinda bought a new television. The deal was attractive to her since she will be required to make monthly interest-only payments on the $1,340 purchase for the first year. How much interest will she pay each month and over the course of the first year assuming 18.75% yearly interest rate?
The amount of interest that Salinda will pay each month is $20.9420.94. (1,340 x .1875 = 251.25/12)
What are the three types of credit?
They are noninstallment, installment, and revolving open-end credit.
Discuss steps you can take to safeguard your personal information.
You can review your credit report regularly and take steps to secure all personal information.
What are some steps you might take to improve your credit score?
You might lower your debt, improve your income, or correct any mistake in your credit report.
