Credit (Buy now, Pay later)

Equal Credit Opportunity Act

Loan/ CC applications judged only on financial responsibility

Credit score

a number assigned by credit reporting companies based on your credit report- higher the score the better

0% introductory offers

a promotion used to bait customers: "interest free for a limited time!"

Capacity

ability to pay

What's not in the FICO score

age, salary, race, color, religion, national origin, sex, occupation, title, employer, date employed, employment history, address, and marital status (prevent discrimination)

Open credit

all money borrowed must be repaid in full every month

Credit bureau

an agency that collects information about you

Credit

an agreement to get money, gods or services now in exchange for a promise to pay in the future

Credit Card Accountability, Responsibility, and Disclosure Act of 2009

bans unfair rate increases, prevents unfair fee traps, plain sight/ plain language disclosures, accountability and protects students/ young people

Fair Issac Corporation (FICO) score

between 300-850; most widely used by lenders

Revolving credit

borrow up to your credit limit (any pre established amount); you repay the amount borrowed in full or make a partial payment

Consolidating debts

combines all loans in to one loan with lower payments

Advantages of credit

convenient, no cash, no need to save cash, useful for emergencies, establish credit rating, and keep track of spending

Interest

cost of borrowing expressed as a % (does not include fees or charges)

Commercial credit

credit used by businesses- federal, state and local gov'ts use credit to fund programs/ projects

Consumer credit

credit used by individuals for personal reasons

Unsecured loan

do not need to supply a deposit, or a collateral in order to receive credit- riskier for banks

Disadvantages of credit

easy to misuse, temptation, costs more, late/ missed payments lower credit rating

Credit report

generally used by lenders, employers, landlords and other service providers to review your credit history- check it to report for errors or for evidence of ID theft

Credit counseling

help consumers with credit problems- revise budgets, arrange new payment plans with creditors and help find other sources of income

Issues with consolidation loans

high interest rate and easily start charging again

Capital

how much you have beyond what you owe (down payment)

3 primary types of credit

installment, revolving and open

Amount of interest depends on:

interest rate, length of loan and amount of loan (principle)

Bankruptcy

last resort: legal process where you are relieved of all debts- can take some/ all assets and bad credit record

3 reasons why you can get denied credit

low income, large current debts and poor payment history- accept/ reject in at least 30 days and reasons why denied

Credit limit

maximum amount of credit that a financial institution extends to a client: pre determined, credit based and customized

Installment credit

money borrowed and repaid in equal amounts in a specified period of time

Grace period

most loans allow payment to be received for a certain period of time after a due date (typically 15 days)

Co signer

needed in order to make up any deficiencies in your credit history

Debtor

one who borrows/ uses credit

Creditor

one who lends/ provides credit

Annualcreditreport.gov

only SECURE website to receive credit information from

APR (Annual percentage rate)

percentage cost of credit on a yearly basis (used to compare offers from different lenders)

4 parts to a credit report

personal information, credit history, inquiries, and public records

Collateral

property/ valuables used to secure the loan

Fair Debt Collections Practices Act (FDCPA)

protects debtors from unfair practices by collection agents- can only call between 9-9, cannot use fake company names, cannot call employer, cannot publicly display statement (like on a post card)

Truth in Lending disclosure

provides the costs in 2 ways: dollars and APR- credit terms in conditions must be included in ads

Character

reputatiuon

Secured loan

requires an asset or other collateral. Bank takes ownership of the collateral if loan is in default

Fair Credit Billing Act

requires creditors to correct billing mistake brought to their attention

Consumer Credit Protection Act or Truth in Lending Act (TILA)

requires disclosure of costs/ terms and protection if cards are lost or stolen

Usury Law

restricts amount of interest charged for credit- no more than 30%

Fair Credit Reporting Act

right to know- what's in your file, right to be notified- of investigations and right to privacy- only authorized persons can see

Payday loan

small, short term, high rate loans

Minimum payment

smallest amount of a credit card bill that a consumer can pay to remain in good standing with the credit card company

Finance charge

total dollar amount you pay to use credit (interest + other costs)

Identity theft

when someone uses your personal information to steal from you, or to create new accounts under our name w/o your permission- cannot be held liable for more than $50

3 credit reporting comapnies

Experion, Equifax and Transunion

Credit services

Federal Trade Commision (FTC), credit counseling, debt consolidation, bankruptcy

FICO score breakdown

35%: payment history, 30%: amounts owed, 15% length of credit history, 10% new credit and 10% types of credit used