Personal Finance unit 4
Consumer Credit Reporting Reform Act
Allowing greater access for consumers to their credit file, including a free cop, of their credit report each year
Between chapter 7 and 13 bankruptcy, which one is easier to obtain credit after you have filed for bankruptcy?
Chapter 13
Give examples of closed ended, open ended, and line of credit.
Closed (loans, car loans, mortgage) Open (credit cards) line of credit ( personal, home equity)
simple interest
Compounded only on the principal
Annual Percentage Rate (APR)
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.
Fair Debt Collection Act
Creates guidelines under which debt collectors may conduct business
Truth in Lending and Consumer Act
Designed to promote the informed use of consumer credit
What should you consider before using credit?
Do you have the cash you need for the down payment? do you want to use your savings instead of your credit?
equal opportunity Act
makes it unlawful for any credit or to discriminate against applicants
Line of Credit
maximum amount of money the creditor has had available to you
Closed end Credit (secured)
one-time loan that you pay back in equal
What do you need when applying for a loan?
personal information, ID.
Fair Credit Reporting Act
protections for consumers against unfair reporting and credit pulling
Credit
someone willing to loan you money, called principal in exchange for your promise to repay it usually with interest
indetedness
the condition of being deeply in debt
Finance Charge
the total amount paid to use credit
Grace Period
time between when loan is due and time in which you incur a late fee (10-15 days)
Co-signing
you agree to be responsible for the loan
What is an advantage of comparing APR among different credit card?
you can find the better APR deal
What is the charge for using credit called?
finance charge
bankruptcy
(Chapter 7) relieves an individual from debts arising from credit card and many but not all debts are forgiven. (no job) (Chapter 13) a debtor with regular income purpose plan for using future earnings or assets to eliminate debts (job)
Consumer Credit (important)
1. Major force in U.S. economy 2. Consumer credit dates back to colonial times 3. Installment credit was accepted in the 1900s
how many years will bankruptcy show up on your credit report?
10 years
how many days do you have to report a billing error on your credit statement?
60 days
What do lenders use to determine if they are going to grant credit?
Credit score, credit report.
when creditors look at credit card applications, what do you believe they look for?
Credit score/ Credit rating
what is the trade off of making small payments on your credit card?
Smaller payments but you have to pay more interest
Interest
The amount you pay to use someone else money
What are the names of the three major credit bureaus?
Trans union, Equifax, Experian
minimum monthly payment
avoid monthly minimum trap (credit card)
What happens to the remaining balance on your credit balance when you don't pay off the full amount?
carries on to the next month
Fair Credit Billing Act
designed to protect consumers from unfair credit billing practices
what is one of the biggest disadvantage of using credit cards?
easy to overspend