Credit 1

What is the range for credit scores?

300-850. The higher, the better.

What is the Schumer box?

A table that shows the terms, rates, and fees charged by credit cards.

What are ways someone can begin to build a positive credit history?

Apply for a credit card, become an authorized user, take out a loan, make payments on time, keep balances low, and keep accounts open, don't open unnecessary cards, and get a co-signer if need be

What are the 5 Cs of credit-worthiness?

Character, Capital, Capacity, Collateral, Conditions

Describe the difference between close-ended (installment) credit and open-ended (non-installment) credit. Give an example for each.

Close-ended is an installment loan, credit is dispersed one time for a certain purpose and a set amt of time. Open-ended is like a credit card, it is a line of credit, you can make repeated withdrawals and payments.

List advantages of credit.

Convenient, Useful for emergencies, Often required to hold a reservation, Purchase 'big ticket' items earlier, Easy form of debt, consolidation, Protection against rip-offs and fraud, Establish a good credit rating

Who can view a consumer's credit report?

Current or potential creditors

Where can you get your credit report?

Equifax, TransUnion, Experian (Online)

Where is the best place for you to view your credit report?

FICO or annual credit report

List disadvantages of credit.

Interest is costly, Additional fees are common, Tempting to overspend, Privacy is an increasing concern, Personally responsible for lost/stolen cards, Identity theft is easier, Can lose financial freedom from overspending

How do you calculate a credit card's new balance?

It is the amount owed by subtracting payments and adding new purchases, finance charges, and fees

What are ways to establish negative credit?

Late or missed payments, applying for too many new cards in a short amount of time, closing older positive accounts and a high amount of money owed over all your credit

What could trigger a card's Penalty APR?

Late payments- like 60 days

What is the amount that MUST be paid each month to avoid penalty fees?

Minimal payment

What information is found on an individual's credit report?

Name, SSN, current and previous addresses, DOB, phone #, employment history, credit history-date of account, limit, monthly balances, payment hx; credit inquires, public records- bankruptcies, tax lien, civil judgment (child support)

When can a person view their credit report for free?

Once a year

What are ways to establish good credit?

Paying bills on time, paying loans on time, having a longer history of using credit, etc.

What are the categories used to determine your credit score? Which one has the greatest weight?

Payment history- 35%, amounts owed, lengths of credit history, new credit, credit mix

How is your credit affected if you pay your utility bills on time every month?

Positively

Who is the lender?

The one that makes funds, goods, or services available with the expectation of being repaid

What is the past due amount?

The required amount not paid before the due date

Why should you comparison shop for a credit card?

To get the lowest fees and interest rates, cashback incentives, rewards, low penalty rates

What amount to avoid interest (APR)?

Total balance

What is the act that started the Schumer box?

Truth in Lending

What happens when your credit score increases?

You can get better interest rates, raises credit limit, easier approval

What is the benefit to using credit wisely?

You can get rewards from it, Build your credit history

What happens to the purchase price when you only make the minimum payment?

You end up paying more because you get charged interest.

What is the definition of credit?

You receive money, goods, or services with the expectation of future payment

According to the 20-10 rule, what percentage of your annual and monthly income should be held by debt (not including mortgages)?

Your borrowing total should be below 20% of your annual after-tax income. Your monthly payments on all credit cards, loans should be no more than 10% of your after-tax income.

What is a credit report?

a record of a consumer's credit history

What happens when your credit score decreases?

higher interest rates, less likely to get approved