Credit Basics

What is the minimum liability?

$0 if the credit card is reported before it is fraudulently used

What is the maximum liability for unauthorized use?

$50

What're some ways to boost your credit score?

-Small closed end loan -Credit card with a co-signer -Secured credit card -Authorized user one a credit card

What're the five C's of credit?

1. Character 2. Capacity 3. Capital 4. Collateral 5. Conditions

What're the three U.S. credit reporting agencies?

1. Equifax 2. Experian 3. TransUnion

Describe three ways a 21 year old may begin building credit:

1. Form a depository institution 2. Set up automatic payments 3. Credit card with a co-signer

Three things a negative credit report may impact an individual's ability to receive?

1. Insurance 2. Apartment 3. Loan

What are three disadvantages to using credit?

1. Interest can be costly when a balance is revolved 2. Additional penalty fees may apply 3. Tempting to overspend 4. Can have a negative impact on your credit score

Give two examples of when using credit, if used responsibly, can be a positive?

1. Investing in education 2. Makes online purchases more safe 3. Buying a home

Three things on a credit report?

1. Late medical payments 2. Repaying history 3. Public records

To obtain a credit card...

1. Must be 21 2. Have a co-signer 3. Or have proof of sufficient income to make payments

Describe three main steps in obtaining a credit card:

1. Shop around- Compare credit card offers and determine which one works best for you 2. Complete a credit application- A form requesting information about a persons ability to repay 3. Approval- Applicant may or may not be approved. If approved, review the final credit terms closely

Tax Lien

A legal claim by a government entity to take an individual's property or income when their taxes are not paid in full

Open-end credit AKA revolving

A line of credit established in advance so the borrower does not have to apply for credit each time new credit is desired

Pawn loan

A loan based on the value of personal property

Closed-end credit AKA installment

A loan which the borrower must repay the amount in a specified number of equal payments

Lender

A person or organization who makes funds available to borrow

Credit History

A record of the borrower's past loan and credit-related transactions

Annual fee

A yearly fee that may be charged for having a credit card

False

All lenders check a person's credit report and score during the loan approval process

How long do open accounts considered to be in "good standing" remain on your credit report?

Always on a credit report

False

An example of a closed-end credit is a secure credit card

Variable- Rate APR

An interest rate that may change depending on other factors, such as the prime rate

True

Annual interest rates for alternative loans can be as high as 300%

Over-the-limit-fee

Charged if the account balance goes over the credit limit

Late-payment fee

Charged when a cardholder does not make the minimum monthly payment by the due date

Positive

Checking credit reports annually to search for mistakes

True

Depending on the credit terms, if a person has a late payment, consequences including higher interest rates, may occur.

How often is interest charged?

Each month the balance is not paid in full

True

Evaluating the purpose of credit is an important consideration to using credit responsibly

Negative

Having many of the same types of credit accounts

True

If an individual does not meet the credit terms for a pawn loan, the lender will keep the property

Bankruptcy

Is a legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts.

Credit Report agencies

Keep a record of a consumer's account history

Is a higher or lower APR better for a credit card and why?

Lower because this mean that the consumer is being charged a lower percentage interest rate.

Positive

Maintaining a reasonable amount of unused credit

It is important to not just pay the __________ each month.

Minimum

How long does medical information remain on your credit report?

Never on a credit report

Negative

Numerous credit applications in a short period of time

Negative

Routinely paying bills late

How long do late or missed payments remain on your credit report?

Seven years

Refund anticipation loan

Short-term cash advance secured by a taxpayer's expected tax refund

Payday Loan

Short-term loan that provides immediate cash by securing a borrower's written check or receiving authorization for automatic withdrawal from the borrower's depository institution account

Rent-to-own loan

Tangible items leased with the condition that the item will be owned by the renter if the term of rent

How long do closed accounts remain on your credit report?

Ten years

Title Loan

The borrower gives the lender his/her automobile title in exchange for a set amount of cash.

Annual percentage rate (APR)

The cost of credit expressed as a yearly interest rate

Penalty APR

The interest rate charged on new transactions if the penalty terms in the credit card contract are triggered

Introductory rate

The interest rate that may be charged right after a credit card account is opened

Credit limit

The maximum amount of charges allowed to an account

False

The terms of a loan are always consistent for the length of the loan

Balance transfers

Transferring debt from one credit card to another

How long do inquiries remain on your credit report?

Two years

Credit

When goods, services, and/or money is received in exchange for a promise to pay back a definite sum of money at a future date

Describe why a person is spending future income when using a credit card?

When using a credit card, interest is being charged. As one borrows money now, they will be paying it off later with high interest.

What has the largest percentage in your FICO score?

payment history 300-850