| A | B |
|---|
| credit | paying at a future date for the present use of goods and services or money |
| line of credit | a pre-established amount that can be borrowed on demand |
| collateral | a loan on which the goods purchased with the loan serve as a type of secured loan |
| open-ended credit | credit whereby you can add purchases up to a credit limit |
| closed-end credit | a loan for a specific amount that must be paid in full, including finance charges by a stated due date |
| deferred billing | a service to customers which allows you to charge now and not be billed for several months |
| service credit | having work performed and paying for it later |
| credit history | your past credit dealings--how you have paid your bills, how many bills you have had and what type, how much total credit you have been given, and how much credit appears to be outstanding now |
| capacity | your ability to repay a loan or make payments on a debt out of your current income |
| credit bureau | a business that accumulates, stores, and distributes credit information to its members |
| APR | the cost of credit expressed as a yearly percentage |
| capital | property owned that is worth more than the owner's debt |
| finance charge | total dollar amount of all interest and fees you pay for the use of credit |
| An example of open ended credit | Visa, Master Card, Discover |
| finance companies charge high interest rates on their loans because | they take a bigger risk than banks or credit unions by granted people credit that others won't grant credit to |
| credit report | a written statement of a consumer's credit history, issued by a credit bureau to its business subscribers |
| character | a reponsible attitude toward living up to agreements, often judged on evidence in the person's credit history |
| credit rating | a measure of creditworthiness based on an analysis of the consumer's financial history |
| Three credit bureaus | Trans Union, Experian, Equifax |
| Examples of public record information that might be on a credit report | lawsuits, bankruptics, marriage, divorce, adoption |
| Why should you care about your credit score? | With a good credit score you are more likely to be granted credit, get a better interest rate on loans |
| 5 C's of Credit | Character/Capacity/Capital/Conditions/Collateral |
| Excellent Credit Rating | A score over 800 Also called an A Rating Customers may pay bills before the due date Customer has well established credit Customer has used credit for many years Customer has paid off debts/loans early |
| Good Credit Rating | 670-739 Sometimes called “B” rating Dependable borrowers May have been slightly late on a payment in the past May not been a very long credit history |
| Fair Credit Rating | 580-669 Ding on their credit report May have been late on a payment: 30, 60, or 90 days |
| Poor Credit Rating | 500 or under--Usually have payments that aren’t paid on a regular basis: 30,60,90 days late Miss monthly payments Need reminders about making payments May have not paid back a debt May have filed for bankruptcy May have been denied credit previously |
| fixed-rate loan | loan for which the interest rate does not change over the life of the loan |
| garnishment | legal process that allows part of your paycheck to be withheld for payment for a debt |
| prime rate | the interest rate that banks offer their best customers |
| principal (loan) | the total amount borrowed--or the unpaid protion of the amount borrowed--on which the borrower agrees to pay interest |
| simple interest | interest on the amount borrowed P x R x T |
| unused credit | the remaining credit available to you--your credit minus the amount you have already spent |
| ways to reduce your credit costs | accept only the credit you need, make more than the minimum payment, only have a few credit cards, shop around for loans |
| 20/10 Rule | credit guideline stating the total borrowing should not exceed 20% of yearly take home pay and monthly payment should not exceed 10% of monthly take-home pay |
| debtor | a person who owes money to others |
| bankruptcy | a legal process that relieves debtors of the responsibility of paying their debts or protect them while they try to repay |
| unsecured debt | a loan that isn't backed by collateral--credit card |
| discharged debts | debt erased by the court when filing bankruptcy |
| Chapter 7 Bankruptcy | a liquidation form of bankruptcy that wipes out most debt--debtors give up most assets |
| Chapter 13 Bankruptcy | bankruptcy that allows debtors to keep their property and use their income to pay their debts over 3-5 years |
| exempted property | possessions that the bankrupt debtor is allowed to keep because they are considered necessary for survival |
| debts not discharged by bankruptcy | child support, alimony, income taxes, student loans |
| How long does a bankruptcy judgment stay on your credit record | from 7-10 years |
| How is Chapter 13 Bankruptcy different that Chapter 7 Bankruptcy | Chapter 13 allows debtors to keep their property and pay their debt over 3-5 years; Chapter 7 wipes out most debt but debtors need to give up most assets |
| Very good credit rating | 740-499-Dependable borrowers, On-time with payments Responsible behavior with credit |
