Credit and Borrowing

Secured Loan

A loan that requires collateral. Less risky for the bank because they can recover some of the money they lost if you stop paying resulting in an interest rate lower than your credit card's interest rate.

What should you NOT use a loan to purchase?

Airline tickets for a dream vacation.

Which item is important to consider when selecting a credit card?

Annual Percentage Rate (APR) and Fees

When looking for pre-approval on a car loan you should...

Compare pre-approval offers and select the one that is best for you.

Credit Card Fees

Credit cards have fees in addition to interest. Fees include annual fees, late payment fees, over limit fees, cash advance fees, and foreign transaction fees.

What can affect credit score?

Credit history (15% having a long history of managing credit makes score higher), New Credit Applications (10% too many cards hurts credit score), Types of Current Credit (10% maintaining a variety of credit accounts like car payments, home payments, and credit cards can help credit), Payment History (35% making payments on time can help score), Current Debt (35% having a lot of debt compared to credit limit can make credit score go down)

Three Major Credit Bureaus that Report Credit Score

Equifax, Experian, and TransUnion from which you can request a free report every 12 months from them or check with the bank or lender.

Which of the following is NOT a recommended method to protect you from identity theft?

Expensive specialty locking or monitoring service.

Why do credit card companies charge more interest on credit cards?

It is an unsecured loan and does not have collateral attached to it, so it is more risk for them. When one does not pay, they have fewer options to get their money back.

Minimum Credit

Lender's do not usually reveal minimum credit score to get a card, but a minimum score of 640 or higher will usually get a credit card. Secured credit cards generally don't have score requirements.

Why is having a good credit score important?

Lenders see a high credit score as a safer person to loan money to, and they are more likely to lend you money resulting in an increase in lending options, more affordable/lower interest rates, and easier renting in things such as apartments.

Credit Limit

Maximum amount that can be charged to the card. You won't be able to charge more to the card until you make a payment to reduce balance owed.

Which of these items is NOT important to consider when selecting a credit card?

The look of the credit card.

Annual Percentage Rate (APR)

The overall interest rate, including all the required fees. If you don't pay your bill in full, interest rates will be charged at this annual rate. Credit card companies often offer introductory APR rates that expire to get you to sign up.

What is a benefit of having a good credit score?

When you need a loan, you'll have more loan offers to pick from.

What option will NOT be available if you are behind on loan payments?

You can ask to get out of your loan.

Which is NOT a positive reason for using a credit card to finance purchases?

You will get charged high interest.

All of the following are benefits to paying the full balance on your credit card each month EXCEPT:

Your credit score can decrease.

The cost of a secured loan is typically lower than the cost of an unsecured loan because _______.

it requires collateral.

Using a loan could help with the purchase of which of the following?

A house

How long does bankruptcy stay apart of credit history?

10 years

Not managing debt wisely can result in...

A decrease in credit score.

Not managing your debt wisely can result in ________.

A decrease in credit score.

Prerequisites for credit cards

Minimum age of 18 years to stand alone or be an authorized user on an adult's card, must have proof of income to show you can pay bills or an adult can co-sign to make authorized user, may need established credit score; if you don't have one yet, you can apply for a student card, get a co-signer, become an authorized user, or apply for a secured credit card

How to stop identity and fraud

Monitor Credit Reports (for false charges or drastic changes in credit score; could mean someone is using personal information to open new lines of credit), Report Errors (contact lender and credit bureaus and they will freeze credit to stop identity thieves from opening accounts in your name), Be Careful (with locking and monitoring services as they cost a lot of money and don't always protect)

How can loan scammer appear?

Over phone (it is illegal to make a loan offer over the phone, all must be in text), If someone asks for routing, credit card, or debit card numbers over the phone, Legitimate lenders look at a person's creditworthiness before offering a loan, remember home loans and mortgages are secured loans and can use a house in collateral for loans

Which is NOT a positive reason for using a credit card to finance purchases?

Paying it off on time can help build your credit history.

Credit Card Type

People may have trouble getting a starter card because they may not have much credit history. A card that requires a lower credit score may work in some cases, but for many, a secured card is a good option. For a secured card, you provide the lender with money to hold and they give you a credit limit up to that amount. This allows you to build your credit while the lender doesn't have to worry about you not paying them back.

Recommended methods to protect yourself from identity theft and fraud include_______.

Placing a credit freeze with the credit bureaus.

Consequences of Banruptcy

Property and possessions can be taken and sold, within limits, Student loans will probably still remain after filing for bankruptcy, Filing for bankruptcy may cost thousands of dollars in fees.

Rewards

Rewards for using credit cards which could include cash back on everyday purchases like groceries, miles for air travel, and points to purchase gift cards. Managing rewards can lead to additional funds for money spent.