Chapter 8 Flashcards
capacity
The financial ability to repay a loan with present income is known as capacity
capital
Capital refers to financial assets (bank accounts, investments, and property) you possess after deducting your debts.
collateral
Collateral is property pledged to assure repayment of a loan, such as the house, car, or furniture being purchased.
(collateral reminder)
If you do not repay your debt as agreed, the creditor can sell the pledged property or collateral to collect on or repay the debt.
credit history
credit history is the complete record of your borrowing and repayment performance.
credit bureau
credit bureau is a business that gathers, stores, and sells credit information to other businesses.
national credit bureaus
Equifax, TransUnion Experian
subscribers
Credit bureaus gather information from businesses, called subscribers
(Each subscriber supplies information about its accounts with customers, including the following:
Names
Addresses
Credit balances
On-time payment record)
credit report
A credit report is a written statement of a consumer’s credit history, issued by a credit bureau to businesses.
credit freeze
A credit freeze is a consumer request that requires the credit bureaus to deny all access to a consumer’s credit information or files.
credit
borrowing money from someone
creditworthy
Before potential creditors will grant credit to you, they must determine whether you are creditworthy.
the 5 c’s of credit
Character
Capacity
Capital
Conditions
Collateral
character
Character is a responsible attitude toward honoring obligations, often judged on evidence in the person’s credit history.
capacity
The financial ability to repay a loan with present income is known as capacity. (leftover money)
a point system is when..
the credit bureau assigns points based on factors such as amount of current debt, number of late payments, number and types of open accounts, current employment, and amount of income.
credit score
When your points are added up, they result in a credit score that tells potential creditors the likelihood that you will repay debt as agreed. (added up points)
credit inquiry
A credit inquiry is a request by a business with a “permissible purpose” to check your credit.
rate shopping
Authorizing a lender to check your credit for a loan will affect your FICO score, unless you are rate shopping for the best interest rate.
improving a fico score
Here are a few tips to use when trying to fix a credit score:
Pay your bills on time.
Improve your payment history.
Keep balances low on credit
cards and revolving credit.
Pay off your debt rather than move it around.
Open accounts slowly—not several at a time.
credit rating
Your credit rating is a measure of creditworthiness based on an analysis of your credit and financial history.
billing statement (credit law)
A billing statement is an itemized list showing changes posted to your account during the period.
