Personal Finance and Business: Chapter 6

Cosigning

You agree to be responsible for the loan payments if the other person fails to make them.

Consumer Credit Protection Laws

Includes Truth in Lending and Consumer Leasing Acts, Equal Credit Opportunity Act, Fair Credit Reporting Act, Fair Credit Opportunity Act, and Consumer Credit Reporting Reform Act.

Applying for Credit

Includes the five c's of credit, credit and equal opportunity, what if your application is denied, time limits on unfavorable data, incorrect information, and legal action.

Net Income

Income you receive from take home pay, allowances, gifts, etc.

Factors to Consider Before Using Credit

These factors include if you can make a down payment, if you could use savings instead of credit, if you could put off buying, and if it will cost you to use credit.

Five C's of Credit

These include character, collateral, credit history, capital, and capacity.

Warning Signs of Debt Problems

These include making only minimum monthly payments, balance on credit cards increases each month, missing loan payments/paying late, using savings/credit to buy everyday expenses, borrowing money to pay off other debts, exceeding credit limit on your credit card, and having been denied credit because of bad credit history.

Types of Credit

These types include closed end credit, open end credit, and line of credit.

Grace Period

Time period during which no interest charges will be added to your account.

Credit

Arrangement to receive cash, goods, or services now and pay for them later.

Consumer Credit

Use of credit for personal needs.

Chapter 7 Bankruptcy

A chapter of the Bankruptcy Code that provides for liquidation (sell for cash) of the debtor's assets in order to repay the creditors. Certain assets or aggregate value of assets of the debtor may be exempt (they don't have to sell) based on state law.

Chapter 13 Bankruptcy

A reorganization form of bankruptcy for individuals that allows the debtors to keep their property and use their income to pay a portion of their debts over three to five years

If Your Identity is Stolen

Contact the credit bureau and put a fraud alert that says creditors should contact you before allowing new accounts to be opened in your name. Then contact the creditor to let them know your identity has been stolen then put this info in writing, and then file a police report in case creditors need proof of the crime.

Annual Percentage Rate

Cost of credit on a yearly basis.

Creditor

Financial institution, merchant or individual that lends money.

Collateral

Form of security to help guarantee that the creditor will be repaid.

Billing Errors and Disputes

If there is an error in your credit, notify in writing, pay undistributed portion, the creditor must acknowledge in 30 days, and takes 90 days to adjust bill or explain it.

Bankruptcy

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.

Open End Credit

Loan with a limit on the amount of money you can borrow (ex: credit card).

Protecting Your Credit from Theft

Make sure your credit is secure, keep records, review statements, read policies, and keep info private.

Line of Credit

Maximum amount of money a creditor will allow a person/business to borrow.

Credit Rating

Measure of a person's ability and willingness to make debt payments on time (FICO score ranges from 300-850).

Closed End Credit

One time loan that you pay back over a specified period of time in equal payments (ex: car loan).

Minimum Monthly Payment

Smallest amount you can pay and remain a borrower in good standing (usually 2-3% of the balance owed on a credit card).

Simple Interest

The interest computed only on the principal (the amount you borrow).

Finance Charge

Total dollar amount you pay to use credit.