6.2 Study Guide

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

explain how debt impacts a person's net worth

assets- your liabilities = net worth

What benefits does a borrower receive from maintaining a positive credit history?

being able to borrow more and longer terms

What's the number one reason you should review each of your three credit reports every year?

being able to prevent thief and fraud

5 credit disasters to avoid AND how long each stays on your report if vou make that credit error.

charge offs- 7 years debt collections- 7 years bankruptcy- 10 years fore closure- 7 years repossession- 7 years tax liens lawsuits

top 3 things you think are most important for a college student

choose a card that is right for you make your payments on time don't let your balance grow

what is the relationship between an emergency fund and credit/loans?

emergency fund has no interest or fees credit/loans has interest and fees

As a high school student, which of the common errors listed would you be most concerned about? Why?

incorrect dates, opened accounts and inquiries I didn't authorize. Because they just seem more dangerous

What 4 questions should you ask yourself before using credit to make a purchase?

necessary? monthly payments fit in budget? save instead of borrow? is it worth the added interest?

give examples of species things could do to increase his net worth by next year

pay down on bills save money

what type of information would be included on a credit report?

payment history- 35% debt to credit ratio- 30% length of credit history- 30% types of credit- 10% new credit account- 10%

What benefit do lenders get from reviewing a prospective borrower's credit report?

to see if you'll be able to pay money

why might it be important to track your net worth?

to see if your fine is increase or decrease

why is it important to maintain a good credit report and score

you get a better chance of getting approved the higher credit score you have the more power to get more, bragging rights

Aelita identifies an error on her credit report: her address is totally wrong she's never lived at the listed address. What should she do next?

you need to contact the ones who created the report.

Credit Bureau

A consumer-reporting company that collects and sells information about how individual people manage their credit (e.g. Equifax)

Credit Report

A document with information about a person's credit activity and history

Fair Credit Reporting Act

A federal law that helps to ensure the accuracy, fairness and privacy of the information in consumer credit bureau files

Payment History

A history of the payments you have made on all credit you have obtained; 35% of your credit score is based on this

Equal Credit Opportunity Act

A law that protects consumers from discrimination in the granting or denying of credit

Bankruptcy

A legal proceeding carried out to allow individuals or businesses freedom from their debts, while simultaneously providing creditors an opportunity for repayment

Credit Utilization Rate

A measurement of your outstanding debt divided by your total available credit; a general rule of thumb is to keep this under 30%

High Rate Method

A method of debt repayment whereby the borrower prioritizes paying down debts with the highest interest rates first

Debt Snowball Method

A method of debt repayment whereby the borrower prioritizes paying down debts with the smallest balances first

Authorized User

A person who has permission to use and/or carry another person's credit card, but isn't legally responsible for paying the bill

Credit History

A record of a person's use of credit over time; 15% of your credit score is based on the length of your credit history

Credit Score

A three-digit number (ranging from 300-850) based on an individual's credit history detailed in a credit report

Types of Credit

Also known as your credit mix. This can include a mix of accounts from credit cards, retail accounts, installment loans, finance company and mortgage loans. 10% of your credit score is based on this.

Credit

An agreement in which a borrower receives something of value now and agrees to repay the lender in the future, generally with interest

Debt Settlement

An agreement made between a creditor and a consumer in which the total debt balance owed is reduced and/or fees are waived, and the reduced debt amount is paid in a lump sum instead of revolving monthly

Collections

An attempted recovery of a past-due credit obligation or debt by a collection department or agency

Soft Inquiry

An inquiry into your credit history as part of a background check. This does not affect your credit score

Hard Inquiry

An inquiry into your credit history, typically in advance of applying for a loan. Hard inquiries can negatively affect your credit for 12 months and remain on your credit history for two years.

Where can you access your credit score for free?

Annual Credit Report.com

name two reasons that paying your credit card or loan bil late has serious consequences.

Can build up affect credit history, saying you dont pay on time

Amounts Owed

How much you owe each creditor individually and in total; 30% of your credit score is based on this

Fast forward to age 45. Which error type would you now be mi concerned with? Why?

Incorect balances or limits. the main one you need the most.

Default

Long-term failure to repay a loan according to the terms agreed to, which has a substantial negative impact on the borrower's credit score

How would you decide whether an error is worth disputing?

Maybe an opinion from professinal, Which ones are common

FICO Score

The most commonly used credit score

New Credit

The number of recently opened credit accounts and all new credit inquiries; 10% of your credit score is based on this

What is a credit score?

a number that helps lenders assist how well you manage your financial


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