PFM: Credit Unit

What is a Cosigner?

A person who signs the loan agreement along with the borrower, this person agrees to repay the loan if the borrower does not.

5 C's of Credit: Credit History

Credit Report: you finacial profile

What are Bank Credit Cards?

Credit cards issued by banks that have a master card, visa, or discovery logo on the card.

What is Credit?

Credit is the ability to borrow money or services with the agreement to pay it back later. The repayment includes interest.

5 C's of Credit: Character

Creditors want to make sure you're reliable and stable.

Benefits of Crdeit: Records and Protection

Enables cardholders fo show proof of purchase and settle disputes with merchants You pay mo charges for fraudulent purchases May immediately cancel loast of stolen credit cards and have new issued.

What are the reasons for debtors cannot pay debt?

Excessive medciall bills, small business failure, overspending and unwise use of credit, losing employment and being over extended, having no savings or emergency fund when unexpected events occur.

What are the 3 main credit bureaus?

Experion, Equifax, and Trans Union.

Define Delinquency

Failure to do your duty or what the law requires. Overdue debt.

Cost of Credits: Penalties

Fees charged for violating the credit agreement

What is wage earner plan?

For those whoe have a steady income, rather than liquidated assets, debtors follow a plan to pay back as much as they can over a 3-5 year period and after that, debts are discharged. Forces creditors stop interest and penalties. Also forces them to cease collection practices.

What is an example of Penalties

Late fee: usually $35 or more assured when a payment is not made by the due date.

Define Forclosure

Legal proceeding a creditor can use when a borrower doesn't make mortgage payments.

Credir Report 2: Credit History

Listing of all credit accounts in the last 10 years of retail credit cards, mortgages and timeline of payments.

Credir Report 4: Inquiries

Listing of all parties who have requested a copy of your credit report.

What are Bank Loans?

Loans offered to consumers through banks.

What are some examples of Bank Loans?

Mortgages, Car Loans, Student Loans

Credit Report 1: Personal Information

Name, Address, SS#, Current and Previous employer

Collateral?

Property that can be used as security for a loan.

What information cannot be included in a credit report?

Race, Gender, Religion, National Origin, Sexual Orientation, Medical History, Credit Score or anyother information unrelated to credit

5 C's of Credit: Capacity

Sufficient cash flow to meet obligations.

What are Charge Cards?

A form of credit card where you pay balance in full every month.

What is bankruptcy?

A legal procedure to relieve a person who cannot pay his or her debts.

What is an Auto Loan?

A loan where the bank lends money to a borrower for the purchase of an automobile. The automobile serves as collertal and is repossessed if payments are not made.

Examples of Service Credit?

Electricity, Water, Doctors and Dentists

What do credit scores range from?

300-850

What is a Line of Credit

A pre-approved amount a debtor can borrow when needed.

Define Garnishment

A proceeding in which a creditor may legally take possession of money or goods held by a third party in payment of a borrower's debt.

What are Installment Loans?

A set amount borrowed at a certain interest rate for a set period of time. The debtor makes regular payments for a set of time to repay the loan.

What is a Grace Period?

A time period during whoch no finanace charges will be added to your account. If you do not make a payment within your grace period, you may be subject to penalties and finance charges.

What is Store Credit Cards?

Allow you to charge items or sevicesonly at the store or with that merchant. These amounts often have high interest rates and require monthly payments.

What is an example of Charge Cards?

American Express Card.

What is an Mortgage?

An installment loan where the bank loans moeny to borrower who will live in a house or condo while making payments to the bank. Collateral for the mortgage is the mortgage.

Cost of Credits: Service Fee

Annual fee charged by a creditor for using for their product pr service.

Who are subscribers to a credit bureau?

Anyone planning to give a loan or credit, such as banks or credit unions, and credit card issuers. Also used by landlords, potential employers, and insurance companies.

What are some examples of Installment Loans?

Car Loans and Mortgages

Benefits of Crdeit: Increased Spending Power

Dont have to save up entire purchase amount ot buy something, Homes, Cars, Appliances Can use thses items while paying them off

Benefits of Crdeit: Convenience and Rewards

Ease of purchases, Cash back and Sky miles programs.

5 C's of Credit: Collateral

Having assets or properties to secure a loan

What are some products or services that you will have to use credit to purchase?

High Value Items: House, Land, Cars. Utilities: Water, Electric, Gas

Whats is an example of Line of Credit?

Home Equity Line of Credit.

What are some examples of Collateral?

House= Mortgag and Car= Auto Loan.

What is the purpose of a credit score?

It gives lenders a guide as to what your credit risk is

Credir Report 3: Public Records

Tax liens, bankruptcies, court judegements or any other negative information regarding credit worthiness. Negative information stays on a credit report 7 years, bankruptcies stay for 10 years.

What is Service Credit?

The ability to receive services and pay for them later.

What is Revolving Credit?

The account holder can charge to the account as often as desired, up to certain limit. The entired debt or part of the debt can be paid each month, meaning the account can have an ongoing balance. The ongoing balance is subject to finance charges.

What is a Credit Bureau?

The clearing house of credit information. Collect information and provides borrowing and bill habits on individual consumers to potential lenders credit bureaus help lenders assess credit worthiness.

Define Repossession

The process of taking an asset used for collateral and selling it tk repay debt. Having an item repossessed hurts a borrower's credit rating. Example: Car Repo.

What are Minimun Monthly Payments?

The smallest amount you can pay on w credit card statement and still remain in good standing with the credit card company. If you only make a minimum monthly payments, you still be subject to finance based on the ongoing balance.

Cost of Credits: Finance of Charges

The total amount (interest and fees) a person pays to use credit. Interest can be charged at a fiexed rate or variable rate.

Cost of Credits: Annual Percentage Rate

The yearly rate that is charged by a lender to a borrower for borrowing money, expressed as a percentage. Credit cards may charge between 14%-25% per year on revolving credit card balances.

What is straight bankruptcy?

Used when an individual seeks to have hir or her debt dishcharged or legally pardoned. Debtor's assets are sold or liquidated and used to pay as much of the debt as possible. Most debts, such as card debt, bank loans, medical bills can be discharged, however tax debt student loans, government fines for criminal charges, child and spouse cannot be discharged.

5 C's of Credit: Capital

What are your liabilities? (assets)