Chapter 8

Question 1

capacity

Answer 1

The financial ability to repay a loan with present income is known as capacity

Question 2

capital

Answer 2

Capital refers to financial assets (bank accounts, investments, and property) you possess after deducting your debts.

Question 3

collateral

Answer 3

Collateral is property pledged to assure repayment of a loan, such as the house, car, or furniture being purchased.

Question 4

(collateral reminder)

Answer 4

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.

Question 5

credit history

Answer 5

credit history is the complete record of your borrowing and repayment performance.

Question 6

credit bureau

Answer 6

credit bureau is a business that gathers, stores, and sells credit information to other businesses.

Question 7

national credit bureaus

Answer 7

Equifax, TransUnion Experian

Question 8

subscribers

Answer 8

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)

Question 9

credit report

Answer 9

A credit report is a written statement of a consumer’s credit history, issued by a credit bureau to businesses.

Question 10

credit freeze

Answer 10

A credit freeze is a consumer request that requires the credit bureaus to deny all access to a consumer’s credit information or files.

Question 11

credit

Answer 11

borrowing money from someone

Question 12

creditworthy

Answer 12

Before potential creditors will grant credit to you, they must determine whether you are creditworthy.

Question 13

the 5 c’s of credit

Answer 13

Character
Capacity
Capital
Conditions
Collateral

Question 14

character

Answer 14

Character is a responsible attitude toward honoring obligations, often judged on evidence in the person’s credit history.

Question 15

capacity

Answer 15

The financial ability to repay a loan with present income is known as capacity. (leftover money)

Question 16

a point system is when..

Answer 16

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.

Question 17

credit score

Answer 17

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)

Question 18

credit inquiry

Answer 18

A credit inquiry is a request by a business with a “permissible purpose” to check your credit.

Question 19

rate shopping

Answer 19

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.

Question 20

improving a fico score

Answer 20

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.

Question 21

credit rating

Answer 21

Your credit rating is a measure of creditworthiness based on an analysis of your credit and financial history.

Question 22

billing statement (credit law)

Answer 22

A billing statement is an itemized list showing changes posted to your account during the period.