Credit

Character (6)

Character is how well you pay your debts back. Your credit history is used to determine your honesty and reliability to pay credit debts. Character is also judged by how well you pay utility bills on time. Your credit report is used to show how prompt you are at paying back debts. Length of time at your present address and how long you have been at your job are used to measure your character. Sometimes character references are requested.

The Five C's of Credit (5)

Character. Capital. Capacity. Collateral. Conditions.

Advantages (7)

Able to buy needed items now or take advantage of sales on large ticket items. Don't have to carry large amounts of cash. Creates a record of purchases. Consolidates bills into one payment. For emergencies. Make reservations at hotels or car rental agencies. Obtain an education.

Your Responsibilities (6)

Borrow only what you can repay. Read and understand the credit contract. Pay debts promptly. Notify creditor if you cannot meet payments. Report lost or stolen credit cards promptly. Never give your card number over the phone unless you initiated the call or are certain of the caller's identity.

Capital (3)

Capital measures how much you are worth by listing your valuable assets. Savings accounts, IRA's, Mutual Funds, Stocks, Bonds, and other investments. These items can be cashed in to help pay back debts if you are in trouble.

Collateral (2)

Collateral is property or ther assets that can be seized if the loan goes into default. Collateral can be a vehicle, recreational vehicle, or real estate.

What is Credit? (2)

Credit is the promise to pay someone back for items you can purchase now. Interest is usually payed on top of the original amount to have this privilege.

The FEAR of Credit (4)

Credit should not always be considered a "bad" thing. It is OK to use credit if it will assist a person to make money. It can also be used for convenience, only if the person can pay back the full balance. There are many advantages and disadvantages to using credit.

Truth in Lending Act (1968)

Ensures consumers are fully informed about cost and conditions of borrowing.

Building a Credit History (7)

Establish a steady work record. Pay all bills promptly. Open a checking account and don't bounce checks. Open a savings account and make regular deposits. Apply for a local store credit card and make regular monthly payments. Apply for a local store credit card and make regular monthly payments. Apply for a small loan using your CD as collateral. Get a co-signer on a loan and pay back the loan as agreed.

Disadvantages (4)

Interest (higher cost of items). May require additional fees or hidden fees. Financial difficulties from abuse of credit. Increased impulse buying may occur.

Single Payment credit (3)

Items and services are paid for in a single payment, within a given time period, after the purchase (interest usually not charged). Utility companies, medical services. Some retail business.

Revolving Credit (3)

Many items can be bought using this plan as long as the total amount does not go over the credit user's assigned dollar limit. Repayment is made at regular time intervals for any amount at or above the minimum required amount (interest is charged on the remaining balance). Retail stores and banks that issue credit cards.

Installment Credit (6)

Merchandise and services are paid for in two or more regularly scheduled payments of a set amount. Interest is included. Some retail businesses, such as car and appliance dealers use this. Money may also be loaned for a special purpose, with the consumer agreeing to repay the debt in two or more regularly scheduled payments. Commercial banks. Consumer finance companies. Savings and Loans/Credit Unions.

Fair Debt Collection Practices Act (1977)

Prevents abuse by professional debt collectors, and applies to anyone employed to collect debts owed to others; does not apply to banks or other businesses collecting their own accounts.

Equal Opportunity Act (1974)

Prohibits discrimination in giving credit on the basis of sex, race, color, religion, national origin, marital status, age, or receipt of public assistance.

Fair Credit Reporting Act (1970)

Protects the privacy and accuracy of information in a credit check.

Conditions (3)

Refer to the general state of the economy. The bank may have too many loans out or they may have very high credit score requirements. Current interest rates effect your ability to get a loan, because the interest is figured into your monthly payment.

Fair Credit Billing Act (1974)

Sets up a procedure for the quick correction of mistakes that appear on consumer credit accounts.

Types and Sources of Credit (3)

Single Payment Credit. Installment Credit. Revolving Credit.

Capacity (5)

This is referred to a person's regular income. It is the income a person has available to repay the loan determined by job longevity and having few other loans. Have you been working regularly in an occupation that is likely to provide enough income to support your credit use? Capacity is measured by figuring your income minus your current debt obligations and other living expenses. The money left is how much you would have available to pay the new credit you are seeking.

Your Rights (5)

Truth in Lending Act (1968); Fair Credit Reporting Act (1970); Equal Opportunity Act (1974); Fair Credit Billing Act (1974); Fair Debt Collection Practices Act (1977).