PFR- Lesson 5

Credit Rating

A measure of a person's ability and willingness to make credit payments on time

Collateral

A valuable asset that is pledged to ensure loan payments

Consumer Credit

Refers to the use of credit for personal needs by individuals and families

Credit Bureau

Agencies that collect information on how promptly people/ businesses pay their bills

Credit

An arrangement to receive cash, goods, or services now and pay for them in the future

Capacity

Borrower's ability to meet obligations

Character

Borrower's attitude toward her credit obligations

ch 7 is straight bankruptcy many but not all debts are forgiven. ch 13 a debtor proposes a plan for using future earnings or assets (agreement to creditor)

Difference between chapter 7 and chapter 13

Conditions

General economic situation that can affect a borrower's ability to repay a loan

Bankruptcy

Legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts.

Open-end-credit

Loans are made on a continuous basis and you are billed periodically for a least partial payment

Annual Percentage Rate

The percentage cost of credit on a yearly basis

Finance Charge

The total dollar amount you pay to use credit

Advantages- safe and don't have to carry cash, convent for booking hotel rooms, and able to enjoy goods and services and pay later. Disadvantages- Easy to overspend, credit costs money, and can lead to bankruptcy

What are 3 advantages and 3 disadvantages of credit

You use savings to pay off old debts. You make only the minimum monthly payment on credit cards. You have trouble making the minimum monthly payment on your credit cards. You miss loan or pay late. You exceed the credit limit on your credit cards

What are 5 warning signs of debt Problems

Character- borrower's ability towards credit Capacity- ability to meet obligations Capital- assets to pay back some of your debts if you lose your main source of income Collateral- valuable assets that is pledged to ensure loan payments Conditions- general economic situation that can affect a borrowers ability to repay a loan

What are the 5 criteria that a lender will use to determine your creditworthiness

Cancel the credit card and get a new PIN number and Notify the credit card company immediately

What should you do if your credit card is lost or stolen

Contact the 3 credit Bureaus Contact the creditors File a police report

What steps should you take if your identity is stolen

Closed-end-credit

You pay back one time loan in a specific period of time and in payments of equal amounts

Capital

borrower's assets or net worth