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Consumer Unit 2

QuestionAnswer
3 C’s of credit Character- have you paid your bills on time Capacity- how much money do you make, how much debt do you have already Collateral (Capital)- do you have something to fall back on if you can’t pay
Equal Credit Opportunity Act Can’t discrimin based on race, color, religion, marital status, age, receipt of public assistance. If turned down for loan, must give reason for denial and credit bureau information was obtained from.
What should you look for when choosing a credit card? Low APR, no annual fee, rewards
Purposes of a credit bureau Collect credit information, compute credit score. Don't determine if you get loan. Only provide credit score to creditors.
Credit utilization ratio (Amt on credit cards/credit limit)x100
Factors used to compute credit score Payment history Credit utilization percentage Length of credit history New Credit Credit Mix
Most important factor in credit score Payment history
Credit card users Those who don’t pay the entire balance - look for cards with low APR Those who pay entire balance - never have to pay interest
Credit card use advantages Rewards Purch protect- reimb if time you purchased was dam/stolen CC dispute Law-if you buy prod/attempt to take back/ seller refuses to take it back, may not have to pay the cc comp. Purch must=at least $50/occur 100 miles of your home
Illegal reasons for turning down loan applicants Age, gender, marital status, religion, etc
Fair Credit Reporting Act If you are turned down for a loan, the creditor must tell you why and which credit bureau furnished the information
Credit Cards for 18 year olds Congress has enacted laws --> got mad at cc industry for scamming kids. Must either have a job or parents have to co-sign
Maximum credit card company would make you pay if card is used fraudulently? $50.
Cash Advance with Credit Card... No grace period, interest computation begins immediately Higher APR Charged a fee between 1% and 5% Can borrow up to your limit
Secured Loans, Unsecured Loans Secured loans have collateral, therefore lower interest rate. Student loans=unsecured loan.
Ways credit card companies make money Interest Annual Fees Transaction Fees (they get a percentage of what you buy every time you use your card) Late Fees
Relationship between loan lengths and payment amount The longer the loan, the less the monthly payments.
Relationship between interest and loan length The longer the loan, the more interest you pay.
Relationship between down payment and monthly payments and total interest The higher the down payment, the less you will pay per month and the less total interest you will pay.
Co-signer for people with no credit history Person agrees to pay if you don’t.
Credit limit Most you can owe on your card at one time.
Check your credit report for... Unauthorized use
Late payments Charged a late fee if one day late Does not go on credit report unless at least 30 days late
Wage garnishment Court order requiring employer to pay a creditor
Chapter 7 Theoretically all assets sold, all debts wiped clean, in reality you don’t lose much if anything because of exemptions
Chapter 13 make monthly payments to court trustee for 3-5 years. Stays on credit report for 7 years
Income... Not used in computation of credit score.
Balance transfers Transferring balance owed on one credit card to another which has a lower interest rate.
Call... Your creditor if you can’t pay.
Non profit debt counselor Help you make a budget Have to cancel credit cards Renegotiate terms of credit like interest rate
Main drawbacks of credit (FRQ). Interest- makes purchases more expensive Tendency to overspend.
Advantages of credit You can use items while paying for them- cars, homes Emergencies
Credit card companies like... People who pay the minimum amount because they make money off of interest.
Created by: 274992
 

 



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