Chapter 16 & 17: Credit Flashcards
1
Q
what is credit ?
A
money borrowed to buy something now, with an agreement to pay later
2
Q
how old do you need to be to have credit -
A
18
3
Q
the history of credit …. in the early years:
A
general stores: ex. dollar store
4
Q
the history of credit in 1900…..
A
increased understanding of credit
5
Q
credit today —
A
1990’s record #of bankruptcy’s
6
Q
the borrower or debtor -
A
person borrowing the$
7
Q
creditor -
A
loaning the money
8
Q
capital -
A
money/ net worth you have after debts
9
Q
collateral-
A
pledging to repay the loan
10
Q
principal -
A
on credit, $ you borrow
11
Q
financial charge -
A
anything you have to pay back over & above the principal
12
Q
all secured loans
- ex. mortgage, car payment
-you pay these in incriments
AKA CLOSE END
A
installment agreement
13
Q
If you dont pay your minimum payment by the due date, you will receive a ……..
A
Late fee
14
Q
When you’re borrowing $ for something, they serve as collaterals -
A
Secured loan
15
Q
Advantages of consumer credit -
A
Purchasing power Emergency funds Convenience Deferred billing Safety
16
Q
Disadvantages of consumer credit
A
Higher prices
Financial charges
Tie up income
Overspending
17
Q
To qualify for credit, you must have th ability to …..
A
Repay the loan
18
Q
Qualification is based on 3 things -
A
Income
Financial position
Collateral
19
Q
Its the value of property you possess after deducting your debts
A
Capital
20
Q
Having capital tells the creditor that you have accumulated ……… which indicates responsibility
A
Assets
21
Q
Your …… represents cash outflow and will be compared to your cash inflow income
A
Debt
22
Q
Types of credit -
A
Open-ended
Close-needed
Service
23
Q
Its a credit card
- open 30-day accounts
- revolving credit accounts
A
Open - ended credit
24
Q
Any installment plans are this type of credit
Ex. Car payments
A
Closed-ended
25
The credit that you have now, but pay for it later
Service credit
26
Its the rate you would pay if you carry a balance
Annual percentage rate
| APR
27
The time you can still pay w/o being charged w/ a penalty -
Grace period
28
What you have to pay in order to get a card-
Annual fees
29
Method of calculating the finance charge:
| Most do an average ..........
Daily balance
30
Sources of credit -
```
Retail stores
Credit card companies
Banks/credit unions
Finance companies
Pawnbrokers
Private lenders
```
31
Ex of retail stores -
Dillard's
32
Someone who works at a pawn shop-
Pawnbroker
33
Borrowing what you dont own -
Private lenders
34
Organizations that makes loans besides banks -
Finance companies
35
Is there a charge to use the coinstar center machine -
Yes but not always
36
Do i need to sort my coins before using the coinstar machine?
No, it does it for you
37
Do i have to redeem the cash voucher at the store where I cash in my coins -
You should do it that day
38
Does the coinstar cash voucher need to be redeemed for cash right away?
No, but you should
39
The free period, also called ......, allows you to avoid a finance charge if you pay in full before the due date -
Grace period
40
One who lends money or the use of goods and services for payment at a later date is known as -
Creditor
41
Paying at a future date for the present use of goods and services or money is called
Credit
42
Is a pre-established amount that can be borrowed on demand -
Line of credit
43
A loan on which the goods purchased with the loan serve as _____ is a type of secured loan
Collateral
44
Is credit whereby you can add purchases up to a set credit limit
Open-ended
45
A loan for a specific amount that must be repaid in full, including finance charges, by a stated due date, is called ...
Closed-ended credit
46
Is money borrowed against the credit card limit
Cash advanced
47
A manufacturer-related company, called ......, makes loans through authorized representatives
Sales finance company
48
Are unlicensed lenders who charge illegal interest rates
Loan sharks
49
Service to customers that allows you to charge now and not be billed for serveral months
Deferred building
50
The interest rate you pay for tthe use of credit is called
Financial charge
51
Almost everyone uses this credit
| Involves having work performed and paying for it later
Service
52
They offer goods and services directly to consumers and include department stores, drug stores, clothing stores
Retail
53
Small loan companies
| Charge higher interest rates and take more risk
Finance companies
54
In some states, maximum interest rates are set by ...... laws
Usury
55
Is a legal business where loans are made based on the value of merchandise used as collateral -
Pawnbroker
56
Something of value that can be sold to pay a debt is often reffered to as -
Collateral
57
T or F
Most disadvantages of credit can be eliminated by wise use of credit -
True
58
T or F
Department stores, drug stores, and finance companies are all examples of retail outlets -
False
59
T or F
Interest rates on loans are usually higher at credit unions than they are at banks
False
60
T or F
Where no usury laws exist, financial institutions may charge whatever rate of interest is agreed upon
True
61
T or F
In an installment purchase agreement, the item you are purchasing will serve as the collateral
True
62
T or F
Affinity cards charge higher interest rates than regular bank credit cards -
False
63
T or F
Credit has helped American economy to grow to a healthy place
True
64
T or F
A line of credit is a preestablished amount you can borrow w/o the new loan application
True
65
T or F
The Truth-in-lending law requires all lenders to calculate APR the same way
True
66
T or F
A debtor is a person who borrows money from others
True
67
Credit cards such as VISA abd MAstercard are examples of ....
Revolving credit agreements
68
What is an examp of a service credit
Telephone bill
69
Fianance companies charge higher rates of interest on loans because ...
They take more risk
70
Pawnbrokers sell merchandise you have pawned, called ......., if you do not repay the loan plus interest by a specificed date
Collateral
71
What is not true about an installment purchase agreement -
New purchases can be added on
72
GMAC Financial Services is an example of a -
Sales finance company
73
Could a person survive in our enconomy w/o using credit at all ?
Yes
74
Some ways ppl must use some form of credit -
Auto loans
Installment loans
Mortgage loans
75
Credit reports has .....
```
Current balance
Current payments
Your credit history
Marriage/divorce
Bankruptcy
```
76
How information is gathered and used:
Subscribers
77
People who pay a fee to credit bureau and share information
Subscribers
78
Whats in your credit file -
Credit bureau
Credit report
Credit history
79
Types of info stored in credit records
Any public info
80
2 services available related to your credit file -
Credit guard services
| Credit freezing services
81
Where you pay someone to monitor your credit -
Credit guard services
82
You can contact the bureau and freeze credit & so no one can touch it
Credit freezing services
83
Five C's of credit -
```
Character
Capacity
Capital
Conditions
Collateral
```
84
How you are financially -
Character
85
Its your ability to pay back -
Capacity
86
Are your assets more then your debt?
Capital
87
Is your job secured?
Conditions
88
Something to pledge for repayment -
Collateral
89
Getting started with credit - (5)
```
Begin w/ savings account
Open checking acct
Open store credit acct
Get small loan
Apply for credit card
```
90
Credit ratings -
Excellent
Good
Fair poor
91
They are well-established
| A rating
Excellent credit rating
92
What your goal should be
| Never late, very reliable
Good credit rating
| B rating
93
Slow payers but do get money out of them
| They are fair
Fair credit ratings
94
Want to avoid!!
| You have debts you dont pay
Poor credit ratting
95
6 credit reports -
```
Summary of info
Public record of info
Credit info
Acct detail
Requests for credit history
Personal info
```
96
5 credit laws -
```
Consumer credit protection act
Fair credit reporting act
Fair credit billing act
Equal credit opportunity act
Fair debt collection practices act
```
97
Its known as the Truth in Lending Act
| -before buying car loan etc. , they have to tell you the full cost of credit before you sign
Consumer credit protection act
98
Its where you have the right to see credit report once a year for free, unless youre denied credit -
Fair credit reporting act
99
If theres an error, you have to contact them & they have to fix the error within a certain time -
Fair credit billing act
100
You cannot be denied credit based on anything other than your credit worthiness ( to prevent discrimination ) is called
Equal credit opportunity act
101
They can keep telling you to pay, but not aggressively or harassing.
They can take your home away, car, etc.
Fair debt collection practices act
102
a responsible attitude toward paying bills and meeting obligations on time is called ....
character
103
your ..... will answer questions about how you have paid your bills, how many bills you had and what type, ho much total credit you have been given and how much credit appears to be outstanding now -
credit history
104
- A credit bureau issues a written statement called ...
| - it itemizes accumulated info about a person through subscribers and public records -
credit report
105
a member of the credit bureau is called .....
| -pays fees for use of the bureau's services in collecting information and issuing reports
subscriber
106
....... scores are the credit scores many lenders use to determine credit risk
FICO
107
is the ability to repay a loan or make payments on a debt out of current income -
capacity
108
existing debts, stability of employment, and personal factors that determine a persons ability to meet financial obligations called ....
conditions
109
is a business tht accumulates, stores, and distributes credit info to members -
credit bureau
110
is a type of rating used by credit bureaus in determining a person's general creditworthiness -
point system
111
an ..... credit rating is earned when u pay ur bills before the due date
excellent
112
a .... credit rating is earned when you pay your bills on the due datte or within a short grace period -
good
113
a ..... credit rating is likely to result in denial of new credit -
poor
114
a ..... credit rating is given to a person who pays during the grace period, but occasionally takes longer
fair
115
is a person hired to collect the balance due -
debt collector
116
the act of treating people differently based on prejudice rather than individual merit is called ...
discrimination
117
T or f
your credit history is an import record of your past experiences w/ credit, and you have rights and responsibilites for its accuracy
true
118
T or f
a credit bureau is a nonprofit company established by members for the benefit of members -
false
119
T or F
most large credit bureaus are computerized clearinghouses that search for and retrieve info to make reports -
true
120
T or F
if you are denied credit based on a credit report, inaccurate info in your file may be the cause
true
121
T or F
a debt collector is allowed to make telephone calls at anytime in order to collect overdue balances
false
122
T or F
the consumer credit protection act prevents discrimination in the judgement of creditworthiness.
false
123
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 # of late payments
True
124
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
125
T or F
A person who is considered a good credit risk ususally meets five basic qualifications, called five C's of credit
True
126
It is lawful for creditors to ask you for person info, such as employment and residence history, in order to determine your creditworthiness -
True
127
T or F
If you believe your bill contains an error, there usually is no hurry in resolving the problem -
False
128
What is an unlawful purpose for a credit report -
Mailing list info
129
The act that provides that you may see your credit file at no charge within 30 days of a credit denial is the ...
Fair credit reporting act
130
If you believe there is an error in your statement , your complaint must be in writing and mailed within ..... days after you receive it
60
131
Your letter of complaint must be acknowledge in .....days
30
132
Within ..... days of receiving your complaint, the creditors must either correct the error or explain why the bill is correct -
90
133
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
134
Credit reports are issued by ....
Credit bureaus
135
Credit files are updated ..... by computers and search procedures
Daily
136
The act known for its provisions requiring full disclosure of all costs in a credit transaction is called ....
Truth-in-lending act
137
To see ur credit file at anytime would cost you ...
A small charge
138
Debt collectors are required to .....
Give costumers the chance to clarify and dispute their bills
