Credit Flashcards
Credit Report
A record of your credit history. Your identity, existing credit, and inquiries.
Credit Reporting Bureau
A company which monitors and creates your credit report
Credit Score
A number which represents your credit “worthiness”, or predicts how likely you are to repay your debts on time.
Which part of a credit score weighs the most? (Will help or hurt you the most)
Payment History (paying on time) is worth 35% of your score.
Which of the “5 C’s of Credit” refers to your credit history, and attempts to show if you are reliable in paying your debt?
Character
Which of the “5 C’s of Credit” refers to the money you can use as a down payment; demonstrates your level of commitment?
Capital
Which of the “5 C’s of Credit” refers to assets you could use to repay your debt if necessary?
Collateral
Which of the “5 C’s of Credit” refers to your ability to repay the debt based on your income and expenses?
Capacity
Which of the “5 C’s of Credit” refers to the overall health of the economy and the specifics of your loan?
Conditions
Installment Credit
A loan with a set interest rate and number of payments (examples are auto loans & student loans). Closed ended.
Revolving Credit
A type of credit where the interest rate can vary, and the payment amount can change based on how much you owe (example: credit card). Open-ended.
Pros of using credit cards
Convenient
Consumer protection
Perks like cash back, frequent flier miles etc.
Not tied to checking account
Cons of using credit cards
High interest rates if not paid in full within 30 days
Temptation to buy things you can’t afford
Minimum payments can take years to pay off the debt
Expensive late payment fees
What type of credit requires collateral and often comes with a lower interest rate?
Secured Credit
What type of credit does NOT require collateral, and therefore usually has higher interest rates?
Unsecured Credit
