Chapter 16 & 17 Flashcards
One of the earliest forms of credit at the local general store
Account
The free period which allows you to avoid a finance charge if you pay in full before the due date
Grace period
One who lends money or the use of goods and services for payment at a later date
Creditor
Paying at a future date for the present use of goods and services or money
Credit
A pre-established amount that can be borrowed on demand
Line of credit
A loan on which the goods purchased with the loan serve as __________ is a type of secured loan
Collateral
Credit whereby you can add purchases up to a set credit limit
Open-end credit
A loan for a specific amount that must be repaid in full, including finance charges, by a stated due date
Closed-end credit
Money borrowed against the credit card limit
Cash advance
A manufacturer-related company that makes loans through authorized representatives
Sales finance company
Unlicensed leaders who charge illegal interest rates
Loan sharks
A service to customers that allows you to charge now and not be billed for several months
Deferred billing
The interest you pay for the use of credit
Finance charge
almost everyone uses this, involves having work performed and paying for it later
Service
Businesses that offer goods and services directly to customers and include department stores, drugstores, and clothing stores
Retail
Small loan companies that charge higher interest rates and take more risk
Finance companies
Maximum interest rates are set by these laws in some states
Usury
A legal business where loans are made based on the value of merchandise used as a collateral
Pawnbroker
Something of value that can be sold to pay a debt
Collateral
T or F? Most disadvantages of credit can be eliminated by wise use of credit.
True
T or F? Department stores, drug stores, and finance companies are all examples of retail outlets.
False
T or F? Interest rates on loans are usually higher at credit unions than they are at banks.
False
T or F? Where no usury laws exist, financial institutions may charge whatever rate of interest is agreed upon.
true
T or F? In an installment purchase agreement, the item you are purchasing will serve as the collateral.
true
T or F? Affinity cards charge higher interest rates than regular bank credit cards.
false
T or F? Credit has helped the American economy to grow at a healthy pace.
True
T or F? a line of credit is a pre-established amount you can borrow without a new loan application.
True
T or F? The Truth-in-Lending law requires all lenders to calculate APR the same way.
True
T or F? A debtor is a person who borrows money from others.
True
Credit cards such as VISA and MasterCard are examples of what?
Revolving credit agreements
What is an example of service credit?
Telephone bill
Why do finance companies charge higher rates of interest on loans?
They take more risk
Pawnbrokers sell merchandise you have pawned, called ________, if you do not repay the loan plus interest by a specified date.
Collateral
What is true about an installment purchase agreeement?
New purchases may not be added on.
What is GMAC Financial Services an example of?
Sales finance company
In determining your ____________ or overall ability to handle credit, a creditor will ask about your past credit performance.
Creditworthiness
A responsible attitude toward paying bills meeting obligations on time
Character
This will answer questions about 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.
Credit history
A credit bureau issues this written statement which itemizes accumulated information about a person through subscribers and public records.
Credit report
A member of the credit bureau that pays fees for use of the bureau’s services in collecting information and issuing reports.
Subscriber
These scores are the credit scores many lenders use to determine credit risk.
FICO
The ability to repay a loan or make payments on a debt out of current income.
Capacity
Existing debts, stability of employment, and personal factors that determine a person’s ability to meet financial obligations
Conditions
A business that accumulates, stores, and distributes credit information to members.
Credit bureau
A type of rating used by credit bureaus in determining a person’s general creditworthiness.
Point system
An ___________ credit rating is earned when you pay your bills before the due date.
Excellent
A _______ credit rating is earned when you pay your bills on the due date or within a short grace period.
Good
A _______ credit rating is likely to result in denial of new credit.
Poor
A _______ credit rating is given to a person who pays during the grace period, but occasionally takes longer.
Fair
A person hired to collect the balance due.
Debt collector
The act of treating people differently based on prejudice rather than individual merit.
Discrimination
T or f? Your credit history is an important record of your past experiences with credit, and you have rights and responsibilities for its accuracy.
True
T or f? A credit bureau is a nonprofit company established by members for the benefit of members
False
T or f? Most large credit bureaus are computerized clearing houses that search for and retrieve information to make reports.
True
T or f? If you are denied credit based on a credit report, inaccurate information in your file may be the cause.
True
T or f? A debt collector is allowed to make phone calls at any time in order to collect overdue balances
False
T or f?the Consumer Credit Protection Act prevents discrimination in the judgment of credit worthiness
False
T or f? Information gathered for credit reports may come from credit applications when you apply for credit
True
T or f? A point system of credit rating is based on assigning value to such things as employment, amount of income, amount of current debt, or number of late payments.
True
T or f? An excellent credit rating results when you pay your bills on the due date every month and never miss a payment
False
T or f? A person who is considered a good credit risk usually meets five basic qualifications, called the 5 Cs of credit
True
T or f?it is lawful for creditors to ask you for personal information such as employment and residence history, in order to determine your credit worthiness
True
T or f?if you believe your bill contains an error, there usually is no hurry in resolving the problem
False
What is an unlawful purpose for a credit report?
Mailing list information
Which act provides that you may see your credit file at no charge within 30 days of a credit denial?
Fair Credit Reporting Act
If you believe there is an error in your statement, your complaint must be in writing and mailed within _____ days after you receive the statement.
60
Your letter of complaint must be acknowledged in _____days
30
The creditor must either correct the error or explain why the bill is corrects within _____ days of receiving your complaint
90
What are the 5 Cs of credit?
Character, capacity, capital, conditions, collateral
The Truth-in-Lending Act limits your liability when a credit card is lost or stolen to the first ______ unless the card is reported lost or stolen before it can be used
$50
To pay your bills on the due date or soon after is to earn a _______ credit rating
Good
Who are credit reports issued by?
Credit bureaus
How often are credit files updated by computers and search procedures?
Daily
What is a good first step in getting started with credit?
Opening a savings account
What is the Act known for its provisions requiring full disclosure of all costs in a credit transaction?
Truth-in-Lending Act
The see your credit file at any time would cost you……..
A small charge
In many cases, people with poor credit ratings have…….
Missed monthly payments, failed to pay back debts, and filed for bankruptcy
What are debt collectors required to do?
Give consumers the chance to clarify and dispute their bills
What are 4 things included on your credit report?
Marriage or divorce, bankruptcy, if you’re being sued, and credit history
A law where you invest and they have to tell you the full cost of credit before you sign
Consumer Credit Protection Act or Truth-in-Lending Law
You have the right to see your credit report once every year UNLESS you are denied credit
Fair Credit Reporting Act
They cannot deny you credit based on anything BUT your credit worthiness
Equal Credit Opportunity Act
Debt collectors can’t harass you to a certain extent (can come and take your car)
Fair Debt Collection Practices Act
What are a few advantages of consumer credit?
Convenience, emergency funds, safety, and purchasing power
What are a few disadvantages of credit?
Higher prices, finance charges, tie up income, and overspending
