Credit Basics form note taking guide
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| Closed-end Credit | Loan which you, the borrower, must repay the amount in a specified number of equal payments
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| Open-end Credit | Extended line of credit (limit on card) established in advance
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| Recommended amount to borrow | The total amount of credit should never exceed over 20% of your annual net income, less than 10% of your monthly income
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| Benefits of using money saved instead of credit | No interest, no contract, not spending future income
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| disadvantage of using money instead of credit | No "rainy day" fund
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| credit | Get good today, pay back another day
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| Credit availability depends on.... | if lenders trust you will pay back the loan as agreed
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| features of alternative credit | may combine elements of closed and open-end credit, usually has higher interest rates, and usually has higher fees
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| Title and Pawn loan | Borrower gives the lender their car title or personal property in exchange for cash (based on value of item)
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| Payday loan | Short term loan that provides immediate cash by securing a borrower's pay check or automatic withdrawal form
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| Rent-to-own | Borrower leases tangible items with the condition that the item will be owned by the renter if the item of rent is completed
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| Refund anticipation loan | lender gives borrower a loan based upon their anticipated tax refund
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| Credit application | a form requesting information about a credit applicant
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| Why might a lender check a persons credit history? | to evaluate your credit report and score
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| what information does the credit application include? | social security number, credit history, ability to pay credit, etc.
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| What is the trade off to no credit history check? | higher interest rates and fees
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| credit sources | private mortgage companies, government (student loans), depository institutions (Bank of America), etc.
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| Credit limit | amount of money the borrower can spend on a credit card
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| interest | pay principal plus pre-determined percentage
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| minimum payment | a minimum amount of money a borrower must pay back by the due date
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| APR | annual percentage rate
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| late payment fee | a fee that is added to the amount that a person must pay because they didn't make the payment by the due date
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| over-the-limit fee | a fee when a person spends over the credit limit
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| Penalty APR | higher interest charged on new transactions when the term are not met on the contract
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| credit card | type of credit, has pre determined amount of money on it that the person holding the card has to pay back to the lender
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| debit card | card that directly takes money from a persons bank account. You pay it back immediately without and interest or fees
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| bankruptcy | When a debtor’s assets are sold to settle unpaid
debts and the debtor is no longer responsible for
further debt beyond what was recovered.
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| Certified Mail | Mail that gives the sender proof of receipt from the
U.S. Postal Service.
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| Credit History | A summary of a person’s borrowing and repayment
history.
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| Credit Report | A report on a person’s creditworthiness that includes
identifying information, credit cards, late payments,
bankruptcies, and savings balances.
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| Fair Credit Reporting Act (FCRA) | Federal law giving consumers the right to view and
correct their credit information.
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| FICO Expansion Score | A creditworthiness score that, like the regular FICO score, is based on nontraditional
accounts and financial information sources and is
designed for young persons, new immigrants, or others
without a traditional credit history
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| FICO Score | Credit score from 300–850 that rates how likely a
person is to fall 90 days behind in a payment.
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| Foreclosure | When a bank takes back a property and auctions it
off to recover the unpaid loan amount.
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| Installment Loan | Loan with equal number of payments of the same
amount over a fixed period of time.
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| Lien | A promise to reclaim an item bought with loaned
money if the loan is not repaid.
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