Chapter 6

credit

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

revolving line of credit

arrangement whereby borrowings are permitted up to a specified limit and for a stated period, usually 5-10 years

Equal Credit Opportunity Act (ECOA)

bans discrimination in the extension of credit on the basis of race, color, age, sex, marital status, and other factors

capital

borrower's assets or net worth

characgter

borrower's attitude toward his or her credit obligations

capacity

borrower's financial ability to meet credit obligations

5 C's of Credit

character, capacity, capital, collateral, conditions

incidental credit

credit arrangement that has no extra costs and no specific repayment plan

convenience users

credit card users that pay off their statements every month

installment cash credit

direct loan of money for personal purposes, home improvements, or vacation expenses. no down payments or make payments in specified amounts over a set period

line of credit

dollar amount, which may or may not e borrowed, that a lender makes available to a borrower

debit card

electronically subtracts the amount of a purchase from the buyer's account at the moment the purchase is made

conditions

general economic conditions that can affect a borrower's ability to repay a loan

open-end credit

line of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payments

co-branding

linking of a credit card with a business trade name offering "points" or premiums toward the purchase of a product or service

home equity loan

loan based on the current market value of a home less the amount still owed on the mortgage

single lump sum credit

loan that must be repaid in total on a specified day, usually within 30-90 days. generally used to buy a single item

closed-end credit

one time loans that the borrower pays back in a specified period of time and in payments of equal amounts

interest

periodic change for he use of credit

credit card accountability responsibility disclosure act

places new restrictions on credit card lending and eliminates certain fees

Consumer Credit Reporting Reform Act

places the burden of proof for accurate credit information on the credit reporting agency

revolving check credit

prearranged loan from a bank for a specified amount. also called bank line of credit

Fair Trade Reporting Act

regulates the use of credit reports, requires the deletion of obsolete information, and gives consumers access to their files and the right to have erroneous data corrected

credit bureaus

reporting agency that assembles credit and other information about consumers. also called consumer reporting agencies CRAs

Fair Credit Billing Act (FCBA)

sets procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods,and promptly crediting payments

mobile commerce

smart phones to make purchases

consumer credit

use of credit for personal needs except for home mortgage

colleral

valuable asset that is pledged to ensure loan payments