Credit 3 Personal Finance16

Fair Isaac Company (FICO)

The most common credit scoring system

What is the past due amount?

The required amount not paid before the due date.

Obtain a car loan

Having a low credit score can make it more difficult to:

creditor

A business that gives you a loan is:

D. It will probably be high

If you get your first credit card while you're a full-time student, what can you expect about the card's APR on outstanding balances?

Annual percentage rate (APR) for purchases

Interest rate charged for amount borrowed per year.

Payment History

Which of the following MOST influences your credit score?

You forgot to pay the cable bill.

Which of the following actions can NEGATIVELY impact your credit score?

creditworthiness

A measure of your reliability to repay a loan.

Character

A person's honesty and reliability, determined by their history of paying bills.

capital

A person's net worth and how much a person has in savings or tied to major assets

5 Cs of credit worthiness

Character, capital, capacity, collateral, and conditions.

Advantages of credit

Convenient, you don't have to use your own money right away, you can stretch amount owed into payments, etc.

It can impact your ability to be approved for bank loans.

Having a good credit score is important because:

One credit report from each credit bureau

How many free credit reports are you legally entitled to each year?

Disadvantages of credit

Interest, credit card companies can try to trick you, minimum payments build up, you might end up paying more than you would if you just paid it in full up front, etc.

Debit card

No interest, linked to a bank account, money is immediately taken from bank.

What are ways to establish bad credit?

Not paying bills on time, choosing minimum payments, taking out loans for things that aren't necessities, etc.

$50

Oh no! Someone stole your credit card and charged $2,500 worth of purchases before you even knew the card was missing. How much of the unauthorized charges can you be required to pay?

Equifax TransUnion Experian

One of the big three credit reporting agencies

What are ways to establish good credit?

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

Late payment fees

Penalty fee for payments not made by the due date.

Credit card

Preapproved credit, charged now payed later, pay interest.

Interest

Price of borrowing money to make a purchase and pay later. Rates vary.

Due Date

The day by which the company requires a payment to be made.

Minimum payment.

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

Credit

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

Principle

When you borrowed $50 from your rich cousin, and then had to pay her back $60, what is the original $50 called?

You inquire about a credit card charge.

Which of the following actions has NO impact on your credit score?

Paying off your credit card bill

Which of the following actions would IMPROVE your credit score?

The smallest payment that will keep a credit card holder in good standing with the lender

Which of the following is the best definition of a minimum payment on a credit card?

Credit scores reflect how likely individuals are to repay their debts.

Which statement about credit scores is TRUE?

APR and fees

You can best compare credit card offers by looking at these two features:

Add finance charges and late fees to your bill

You forgot to pay last month's credit card bill. Your creditor will probably:

Capacity

Your Ability to Repay Debt...Can you make payments?