Credit P.F.

What is a secured loan?

a loan that is guaranteed by a personal business asset

What are the three major credit bureaus?

Equifax TransUnion Experian

You purchase a car for $20,000. You made a down payment of $5,000 and took out a loan for the rest. What is the principal balance of the loan?

$15,000

What are some rules to help you use credit cards successfully? (6 rules)

1. You need credit in this society. Do not abuse credit or you will regret it. 2. 2-4 Major cards is good (no more than 5) (1-2 according to Mrs. Washington) 3. Know how much credit you have available and do not exceed your limit 4. Make monthly payments more than the minimum until you have good credit Once established, pay balance every month. 5. Keep records so that you are able to dispute any discrepancies. 6. Pay attention to your credit to avoid identity theft.

What is a credit score?

A credit score is a number that represents your credit-worthiness, or the risk a financial institution will take in loaning you money.

Who determines your credit score?

Credit Bureaus

Why is credit important? 3 things

Credit is important because it can determine whether you can purchase items. Credit is important because it can determine how much you will be charged to borrow money. Credit is important because it can determine your financial future.

When borrowing money, why do you think it is important to know the terms?

So you know how long you have to repay the loan, how much your monthly payment is, what happens if you miss a payment

How did having a poor credit score affect your interest rate, monthly payments, and the total price paid for the car?

They all increased and were more expensive than than if you had a good credit score.

How can having a relationship with the lender benefit you?

They may be able to offer you a better interest rate than another bank.

how lenders use your credit report:

They use it to see how much you are in dept, if your debt to income ratio is acceptable, if you have a steady job, if you have ever filed for bankruptcy, if there are any legal judgements against you, how many credit cards or loans you apply for, if your inquiries are necessary, if the accounts are in good standings, if there are not many late payments, if there are no collection accounts, and that you have a good credit score. All of this is used to see how much you can be given a loan for and if you can buy a car, house, etc.

What is a collections account?

You have become so delinquent, the original lender has written-off the debt. The lender has given the debt to an outside agency.

is the paying off of debt with a fixed repayment schedule in regular installments over a period of time

amortization

Give an example of a revolving account:

credit card

small, plastic card issued by a bank or business allowing you to purchase goods and services on credit

credit card

What factors help lenders assess your credit risk?

debt to income ratio, employment history, credit history, and credit score

What section(s) of the credit card statement shows the minimum payment due?

header

Give an example of an installment account:

home loans and auto loans

What do loan terms include?

how much you borrow, what kind of credit you are seeking, how much money you invest upfront, how long you take to pay the money back

the rate lenders charge borrowers for money; based on factors including borrower's credit and financial market performance.

interest rate

a sum of money that is borrowed, which is expected to be paid back with interest

loan

What is a closed-ended loan?

loans that are for a single use

What section of the credit card statement shows the latest transactions?

month's activities

What type of loan is a credit card?

open-ended loan

the non-interest portion of a loan

principal

What can you do with credit?

purchase something right now that you are unable to pay for upfront. You have to borrow money from a lender and pay it back.

What is the Prime Rate?

represents the general level of interest rates in the economy. This number is the starting point for determining your interest rate.

Which type of credit card is good if you have credit issues?

secured

Give three examples of closed-ended loans:

student loans, secured loans, unsecured loans

Define interest

the fee that is paid to borrow money

What information do the bureaus consider to create your score?

the number of credit accounts, outstanding debt, collections accounts, and bill paying habits

Lenders use these reports to determine:

the score they will use, whether you will be approved for credit, how much credit will be awarded

What are the two types of credit cards?

unsecured and secured