Credit

Loan Application

-Borrowers need to provide info regarding their assets-more assets means there is a higher chance that the person will be granted credit because they are more likely to repay debts. -An application is very carefully assessed and depending on the persons age their school or employer will be contacted. -avoid pawn shops, payday loans, and tax-refund loans

Role of credit reporting agencies and creditors

A credit reporting agency collects credit information from creditors and provides that info. to potential creditors to interpret. The potential creditor, not the credit reporting agency, decides whether to grant an applicant credit.

Debt

A debt is created when one person owes another person or organization money. A credit debt may be created by making a purchase with a credit card, buying large items using a credit contract, or getting a cash loan.

Redlining

A form of discrimination in granting loans, insurance, or other financial benefits. A "red line" is drawn around a troubled area and vow not to lend or insure property there because of poor economic conditions.

Garnishments/Wage assignments

A garnishment is a court order requiring an employer to pay part of the employees wage to a creditor, A wage assignment is a contract clause in which the debtor agrees in the original contract to let the creditor ask their employer to hold part of their wages if the creditor shows that the shows that the employee has defaulted on a credit contract.

Closed end credit

A loan made for a specific amount of money and length of time. Such as car and mortgage loans.

Installment Loan

A loan you pay back in monthly payments for one or more years.

Credit Score

A method used by credit grantors to determine the amount of credit to grant to an applicant.

Open end credit

A revolving line of credit that s offered by banks and other lenders to consumers. There is a limit set on the line of credit and funds, products or services are accessed using a credit card or debit card, check, store charge card, or cash advance. Consumers pay interest on the outstanding balance. Borrower can keep borrowing over and over up to the credit line.

Variable interest rate

Allows for the interest to be changed during a specific period of time-potential for inflation should be considered.

Credit counseling service

Can work out an extended repayment program with your creditors, better than negotiating by yourself. (cccs)

Fixed interest rate

Charge the same amount of interest over a long time period creates lower monthly payments but greater interest payment.

Consolidation of Loans

Combine all your consumer credit into one loan so you have only one payment. Often cost more in total finance charges because they take a longer time to pay off.

Credit card payment

Considered to have been made on the date the payment is posted to the account, not when it is mailed

Credit report

Most of the adverse information on a credit report appears for 7 years.

Minimum payment

Only paying a small portion(2-4%) of the bill . The interest is charged on the large unpaid balance resulting in the largest dollar amount in finance charges. If you pay off the credit card balance shortly after you receive it, you will pay no finance charge. The percentage is set by the credit card company. Must be payed each month to prevent negative info from being sent to the credit bureau.

Closing credit card account/disposal of credit card.

People trying to use other peoples credit accounts sometimes dumpster dive to find old credit cards. They use the account number to access the persons credit. Some creditors close accounts after they are inactive for a certain amount of time.

Credit card fraud

Potential credit issuers need to know some personal information in order to learn about your credit history and determine your credit-worthiness, Information is power, keep yours secure.

Predatory lending

Uses abusive practices in any type of credit but the lenders primarily target applicants for home loans. Give repayment terms that the person cannot afford.

Credit card balance and limit

When the credit card account balance is greater than the credit limit, the consumer cannot charge anymore on that card because that would be more credit than he was approved.

Trouble repaying credit

When you cant pay the balance, the fort step is to notify creditors because they might give you a new payment plan.

Collateral

collateral is a tangible asset that is issued to secure a loan. In the case of mortgage, the house serves as collateral.Collateral is necessary for a secured loan to protect the lender. Pawnshops that exchange loans for tangible objects they are considered as collateral loans.

Federal Housing Administration (FHA)

insures lenders who make mortgage loans that are riskier than bank loans because FHA loans are made for people who would not normally qualify for low cost mortgage from banks. Want to promote home ownership.

Bankruptcy

Filing for bankruptcy, filers are saying that they cannot pay off their debts and ask the bankruptcy court to take some of their assets, sell them to give money to their creditors, and consider the debts discharged. Some debts such as child support are still due by filer.

Credit bureaus and credit reporting agencies

Get their information from stores, banks and other creditors as well as public records-this information is compiled into their credit score or record.

Inaccurate credit report

If requested by the consumer, the credit bureau must investigate the challenges info. on the credit report and modify or remove inaccurate information.

Denial of credit/credit report

If requested within 60 days after the denial , you must be provided with a free copy of the credit report from the specific credit reporting agency whose report was basis for denial. Potential creditors look at these reports in order to decide what they should do.

Co-signer responsibility

If the borrower does not pay the debt, the co-signer has the obligation to pay it.

Uncollateralized loan

Is a loan that does not have an asset to support it.

Finance charge on credit card

The cost of credit in dollars. Calculated on a credit cards unpaid balance. A finance charge, the cost of having the debt a longer time is added to the outstanding credit card balance.

Applying for credit

The creditor reviews your credit record to determine whether or not to give you credit.

Discrimination

The equal credit opportunity act forbids creditors from denying credit in the basis of gender, marital status, race, religion, age, or natural origin.

Down payment and impact on monthly payment.

The higher the down payment, the lower the monthly payment. The lower the dollar amount of a loan the smaller the monthly payments. It is important to get the lowest interest rate-known as APR.

Credit

The key elements of credit are using someone elses money, paying it back, and paying interest. The cost of credit is interest. If you do not promise to pay money back it is considered a gift.

Liability for stolen cards

The most you are liable for when your credit card is stolen is $50 per card. You should have a list of your credit cards with account and telephone numbers in case a card gets stolen and you need to report it.

Credit card purchases(timing)

The purchase amount is immediately added to the credit card account balance by the credit card company. Your credit card statement is generated once a month.

Annual percentage rate

The true cost of credit is expressed as this percentage.(APR)

Steps to build credit worthiness.

To establish credit worthiness you must have credit and use it responsibly.New debtors will only get small amount of credit granted to then so the lender can see how the deal with it, Having a checking account in good standing will give you a good start.

Credit Rating

To have a high credit rating is a valuable asset. To obtain a good credit rating a person should limit borrowing to the persons capacity to repay the amount borrowed. Paying bills on this time shows this principal in action.

Unauthorized purchases

Under the truth lending act, you do o=not have to pay for unauthorized charges made after you notify the card company of loss or theft of your credit card.