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.