Credit 3 Personal Finance16 – Flashcards
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A business that gives you a loan is:
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creditor
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Having a low credit score can make it more difficult to:
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Obtain a car loan
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How many free credit reports are you legally entitled to each year?
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One credit report from each credit bureau
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Which of the following actions would IMPROVE your credit score?
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Paying off your credit card bill
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Which of the following MOST influences your credit score?
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Payment History
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Which of the following actions has NO impact on your credit score?
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You inquire about a credit card charge.
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Which of the following actions can NEGATIVELY impact your credit score?
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You forgot to pay the cable bill.
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One of the big three credit reporting agencies
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Equifax TransUnion Experian
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Having a good credit score is important because:
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It can impact your ability to be approved for bank loans.
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Which statement about credit scores is TRUE?
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Credit scores reflect how likely individuals are to repay their debts.
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Oh no! Someone stole your credit card and charged $2,500 worth of purchases before you even knew the card was missing. How much of the unauthorized charges can you be required to pay?
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$50
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You can best compare credit card offers by looking at these two features:
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APR and fees
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You forgot to pay last month's credit card bill. Your creditor will probably:
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Add finance charges and late fees to your bill
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Which of the following is the best definition of a minimum payment on a credit card?
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The smallest payment that will keep a credit card holder in good standing with the lender
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When you borrowed $50 from your rich cousin, and then had to pay her back $60, what is the original $50 called?
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Principle
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If you get your first credit card while you're a full-time student, what can you expect about the card's APR on outstanding balances?
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D. It will probably be high
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When goods, services, or money are received in exchange for a promise to pay back a definite sum of money at a future date.
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Credit
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Character, capital, capacity, collateral, and conditions.
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5 Cs of credit worthiness
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A person's honesty and reliability, determined by their history of paying bills.
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Character
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A measure of your reliability to repay a loan.
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creditworthiness
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A person's net worth and how much a person has in savings or tied to major assets
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capital
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Your Ability to Repay Debt...Can you make payments?
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Capacity
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Convenient, you don't have to use your own money right away, you can stretch amount owed into payments, etc.
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Advantages of credit
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Interest, credit card companies can try to trick you, minimum payments build up, you might end up paying more than you would if you just paid it in full up front, etc.
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Disadvantages of credit
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Paying bills on time, paying loans on time, having a longer history of using credit, etc.
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What are ways to establish good credit?
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Not paying bills on time, choosing minimum payments, taking out loans for things that aren't necessities, etc.
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What are ways to establish bad credit?
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The required amount not paid before the due date.
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What is the past due amount?
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What is the amount that must be paid each month to avoid penalty fees?
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Minimum payment.
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No interest, linked to a bank account, money is immediately taken from bank.
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Debit card
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Preapproved credit, charged now payed later, pay interest.
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Credit card
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Price of borrowing money to make a purchase and pay later. Rates vary.
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Interest
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Interest rate charged for amount borrowed per year.
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Annual percentage rate (APR) for purchases
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The day by which the company requires a payment to be made.
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Due Date
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Penalty fee for payments not made by the due date.
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Late payment fees
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The most common credit scoring system
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Fair Isaac Company (FICO)
