Consumer credit

Question 1

Credit Score

Answer 1

A credit score is a number that helps lenders, like banks and credit card companies, decide whether to lend you money. It’s important because the higher your credit score, the easier it will be for you to get approved for loans and credit cards.

Question 2

different ranges of scores

Answer 2

300 - 579: Poor
It will be hard to get approved for loans or credit cards, and you may have to pay higher interest rates.
‍
580 - 669: Fair.
You might get approved for some loans and credit cards, but you may not get the best interest rates.
‍
670 - 739: Good.
You should be able to get approved for most loans and credit cards, and you should get good interest rates.
‍
740 - 799: Very good.
You’ll have an even easier time getting approved for loans and credit cards, and you’ll get some of the best interest rates.
‍
800 - 850: Excellent.
You’ll have no problem getting approved for loans and credit cards, and you’ll get the best interest rates available.

Question 3

Find out your credit score

Answer 3

• Many credit card companies will provide your credit score to you for free as part of your account benefits. Check your account online or contact your credit card company to see if they offer this service.
• You can use one of the many free credit score websites, or apps like Credit Karma to check your score. Be aware that some of these sites will require you to sign up for an account and may offer additional services for a fee.
• You can purchase your credit score directly from one of the three major credit bureaus (Experian, Equifax, or TransUnion). Each bureau has its own methods for calculating your score, so your score may differ slightly between each bureau.
• Finally, you can request a free copy of your credit report from each of the three credit bureaus once per year. While this report won’t contain your credit score, it will contain all the information that is used to calculate your score. You can use this information to get a rough idea of where your credit stands.

Question 4

Raising your credit score

Answer 4

• Pay your bills on time
  Late payments can have a negative impact on your credit score, so it’s important to pay all your bills on time and in full whenever possible.
• Keep your credit utilization low
  Your credit utilization is the percentage of your available credit that you’re using. For example, if you have a credit card with a ‍limit and you’re using ‍of it, your credit utilization is. If you’re using more than ‍of your available credit, it can hurt your credit score.
• Monitor your credit report
  Keep an eye on your credit report to make sure there aren’t any errors that could be hurting your score. If you find any inaccuracies, be sure to dispute them right away.
• Build a longer credit history.
  Your credit score is partly based on how long you’ve been using credit. So, the longer you have a credit history, the better. Do not close any credit accounts, even if you have not used them in a while.
• Avoid applying for too many new credit accounts.
  Every time you apply for a new credit account, your credit score takes a small hit. If you apply for multiple new accounts in a short period of time, it can add up and impact your score.
• Keep a mix of credit types.
  Having different types of credit (like a mortgage, car loan, and credit card) can show that you’re able to manage different types of debt, which can boost your credit score.

Question 5

What factors lower a credit score?

Answer 5

• Missing payments
• Having too much debt.
• Applying for too many credit cards or loans
• Defaulting on a loan. If you stop making payments on a loan and the lender charges it off as a loss, this will seriously damage your credit score.
• Having a short credit history.
• Bankruptcy. Filing for bankruptcy will significantly damage your credit score, and the bankruptcy will stay on your credit report for up to ten years.

Question 6

What is in a credit report?

Answer 6

A credit report is a document that shows how you use money and pay your bills. It is like a report card for your financial behavior.

• Your name, address, date of birth, and social security number
• Your current and past accounts, such as credit cards, loans, mortgages, and utilities
• Your payment history, such as whether you pay on time, late, or miss payments
• Your credit limit, balance, and available credit
• Your public records, such as bankruptcies, foreclosures, liens, or judgments
• Your inquiries, such as when you apply for new credit or check your own credit

Question 7

Who creates and updates your credit report?

Answer 7

Your credit report is created and updated by three major credit bureaus: Equifax, Experian, and TransUnion. These are independent companies that collect and verify information from lenders, creditors, landlords, employers, and others who do business with you. They also use a system called FICO to calculate your credit score, which is a number that summarizes your credit risk. Your credit score can range from ‍to, with higher scores being better.

Question 8

FICO (Fair Isaac Corporation)

Answer 8

They also use a system called FICO to calculate your credit score, which is a number that summarizes your credit risk. Your credit score can range from ‍to, with higher scores being better.

Question 9

Credit report VS. Credit history

Answer 9

A credit report will contain specific details about each of the loans you have taken out, such as the date the loan was opened or closed, the balance, and payment history. But a credit history is more of a summary, and might describe your borrowing history more generally, such as noting that you started borrowing money ten years ago, have always made payments on time, and have paid off most of your balances.

Question 10

Credit cards

Answer 10

Credit cards are a type of payment card that lets you borrow money from a bank or credit card company. You can use that borrowed money to buy things at stores, restaurants, and other places that accept credit cards as payment.

You’re basically making a promise to the bank or credit card company that you’ll pay back the money you borrowed. They keep track of how much you owe, and you have to pay at least a little bit back each month.

The bank or credit card company also charges you interest, which is like a fee for borrowing the money. The longer you take to pay back the money, the more interest you’ll have to pay.

Question 11

Why do you need a credit card?

Answer 11

It’s a convenient way to pay for things without carrying around cash.
It can help you build credit, which is important if you want to take out a loan or mortgage in the future.
Some credit cards come with rewards or cash back, which means you can get a little bit of money back for every dollar you spend.
It’s good for emergencies, and unplanned expenses.
Some credit cards offer purchase protection, so if you buy something with your credit card and it breaks or doesn’t work, the credit card company might help you get your money back.

Question 12

Why you might NOT want a credit card?

Answer 12

It can be easy to overspend and get into debt when you don’t have to pay for things right away.
If you don’t pay your bill on time, your credit score can go down, which could make it harder to get a loan or mortgage in the future.
You’ll have to pay interest, which means you’ll end up paying more for things than if you just used cash.
Fees, sometimes the credit card comes with extra fees you have to pay.

Question 13

Standard credit card

Answer 13

These are the most basic credit cards. They have a credit limit, which is how much you can spend. You have to pay back what you spend, plus interest, which is a fee for using the credit. You can pay the full amount or a part of it every month. Some standard credit cards have annual fees, which are charges you pay every year to use the card.

Question 14

Rewards credit cards

Answer 14

These are credit cards that give you some benefits for using them, such as points, cash back, miles, or discounts. You can use the benefits for things like gift cards, merchandise, or travel. Rewards credit cards may have higher interest rates or annual fees than standard credit cards, and they may have rules or limits for the benefits. They are a great choice for people who are disciplined about paying off their balances each month.

Question 15

Secured credit cards

Answer 15

These are credit cards that need you to deposit some money as a guarantee that you will pay back what you spend. The deposit is usually the same as your credit limit. You can get the deposit back when you stop using the card or switch to a regular credit card. Secured credit cards are for people who have no credit or bad credit, and want to improve their credit score.

Question 16

Student credit cards

Answer 16

These are credit cards for college or university students. They usually have lower credit limits and interest rates than regular credit cards. Student credit cards can help students build and keep a good credit history, which can help them after graduation. But students also have to be careful not to spend too much or miss payments, as this can hurt their credit score and cause debt problems.

Question 17

Business credit cards

Answer 17

These are credit cards for business owners or employees who need to pay for business-related expenses, such as travel, supplies, or equipment. They usually have higher credit limits and interest rates than personal credit cards, and they may offer some benefits, such as rewards, cash flow, or tax deductions. Business credit cards can help separate personal and business finances, and track and manage spending.

Question 18

Store credit cards

Answer 18

These are credit cards that are issued by specific retailers, such as department stores, gas stations, or online shops and they can only be used at those retailers. They usually have lower credit limits and higher interest rates than other credit cards, but they typically offer some benefits, such as discounts, coupons, or loyalty points.

Question 19

What to look at when choosing a credit card

Answer 19

• APR/Interest Rate
  Extra to pay
• Annual Fee: Many credit cards come with an annual fee. This is a fee you pay each year simply for having the card.
  If you’re on a tight budget, you may want to look for a card with no annual fee. On the other hand, some cards with annual fees offer additional benefits that may be worth the cost.
• Rewards and Perks: for example, you may earn points for every dollar you spend that can be redeemed for travel, gift cards, or other rewards. Some cards offer cash back on purchases.
• Credit Limit: Your credit limit is the maximum amount you’re allowed to spend on the card. This amount is set by the credit card company and is based on your credit score and income.
  Do you use your card frequently?
• Other Fees and Penalties: Some cards may charge a late payment fee, an over-the-limit fee, or a foreign transaction fee.
  Are you going to make these kinds of transactions, etc.

Question 20

APR

Answer 20

This is the yearly interest rate you have to pay if you don’t pay your bill in full each month.

Question 21

Other APRs

Answer 21

Some credit cards have different APRs for different types of transactions. For example, you might have one APR for purchases, and a higher APR for cash advances.

Question 22

Variable rate information

Answer 22

Some credit cards have variable APRs, which means the interest rate can change over time. This section will explain how and when that can happen.

Question 23

Grace period

Answer 23

This is the amount of time you have to pay your bill in full before you’re charged interest.

Question 24

Annual fee

Answer 24

Some credit cards charge a yearly fee. This section will tell you how much it is.

Question 25

Minimum finance charge

Answer 25

This is the smallest amount of interest you can be charged if you don’t pay your bill in full.

Question 26

Transaction fees

Answer 26

Credit cards might charge fees for different types of transactions, like balance transfers or cash advances. This section will explain what they are.

Question 27

Penalty fees

Answer 27

If you miss a payment or go over your credit limit, you might be charged a penalty fee. This section will tell you how much it could be.

Question 28

Schumer box

Answer 28

Schumer box is a table or chart that credit card companies are required to include in marketing materials and credit card agreements in the United States. It summarizes key information about the credit card, such as interest rates, fees, and penalty charges, in a way that is meant to be easy for consumers to understand. If you are considering applying for a credit card, you can find the Schumer box by clicking on a link that says “rates”, “terms”, “info”, or something similar. Each bank has a different way of naming it. It’s a requirement to provide certain information listed above on flashcards.

Question 29

Payment methods

Answer 29

• Cash
• Debit cards
• Credit cards
• Rent-to-own
• Store credit
• Installment agreements
• Layaway

Question 30

Cash

Answer 30

Cash can be a good option if you want to avoid overspending, as you’re limited to the amount you have on hand. However, carrying large amounts of cash can be risky, and you won’t be able to make large purchases this way.

Question 31

Debit cards

Answer 31

Debit cards pull money directly from your bank account, so you don’t have to worry about incurring interest charges like you would with a credit card. However, some people don’t like that debit card transactions can take a few days to process, which can make it difficult to keep track of your account balance.

Question 32

Rent-to-Own

Answer 32

With rent-to-own agreements, consumers can take home items like furniture, electronics, or appliances, and make weekly or monthly payments on them until they are paid off. Rent-to-own stores usually do not require a credit check, which makes them a popular option for people with bad credit. However, consumers should be aware that they usually end up paying much more for items than they would if they bought them outright.

Question 32

Store Credit

Answer 32

Many retailers offer store credit (or in-store financing), which lets consumers buy items and pay for them over time. Store credit can come in the form of a line of credit (like a credit card), or an installment plan, where consumers make fixed monthly payments over a set period of time. For example, if you buy a new TV from a store that offers store credit, you can pay for it in monthly installments. While some stores offer zero-interest financing, others may charge interest or fees.

Question 33

Installment Agreements

Answer 33

An installment agreement is a type of contract that lets a consumer buy a product or service and pay for it over time. It is similar to store credit, but it can be used for a wider range of purchases. For example, you might use an installment agreement to buy a car, pay for a medical procedure, or even finance a vacation. With an installment agreement, you agree to make fixed monthly payments for a set period of time, usually with interest.

Question 34

Layaway

Answer 34

Layaway is a purchasing arrangement that some stores offer to customers. With layaway, a customer can reserve an item they want to buy, and make payments towards the total cost over time. For example, if you want to buy a TV that costs but you do not have the full amount at the time. With layaway, you can pay for the TV by paying a certain amount each week or month until you’ve paid the full retail cost. Once you’ve paid in full, you can take the TV home.