credit unit review

Question 1

3 things to do to build credit history

Answer 1

• pay your bills on time
• apply for a credit card
• make regular payments

Question 2

3 c’s of credit

Answer 2

• character
• capacity
• capital

Question 3

what is character?

Answer 3

willingness to repay the debt

Question 4

what is capacity?

Answer 4

ability to repay debt

Question 5

what is capital

Answer 5

what happens if you don’t pay the debt

Question 6

characteristics of installment credit

Answer 6

• big ticket items
• regular payments set by creditor
• interest included in the payment
• may require down payment
• may require collateral or a co-signer

Question 7

characteristics of revolving credit

Answer 7

type of credit that does not have a fixed number of payments, in contrast to installment credit

Question 8

APR

Answer 8

annual percentage rate

Question 9

credit limit

Answer 9

• the amount of money that is available to you
• varies due to your credit worthiness

Question 10

grace period

Answer 10

• length of time you have to pay your credit card balance in full without accruing interest charges
• usually 25 days

Question 11

principal

Answer 11

original amount of money borrowed

Question 12

term

Answer 12

length of a loan

Question 13

amortization

Answer 13

periodic payments that are applied to both the principal and interest

Question 14

collateral

Answer 14

something pledged as security for repayment of a loan, to be forfeited in the event of a default.

Question 15

equity

Answer 15

the amount of money the owner of an asset would be paid after selling it and any debts associated with the asset were paid off

Question 16

FICO

Answer 16

ranges from 300-850

Question 17

default/penalty rate

Answer 17

higher interest rate that is applied because you did not honor the terms of the cardholder agreement

Question 18

subsidized loans

Answer 18

loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid

Question 19

unsubsidized loan

Answer 19

loans for both undergraduate and graduate students that are not based on financial need

Question 20

FAFSA

Answer 20

free application for federal student aid

Question 21

variable rate

Answer 21

the rate can go up or down based on fluctuations in the prime rate

Question 22

fixed rate

Answer 22

an unchanging rate charged on a liability, such as a loan or mortgage

Question 23

3 credit bureaus that keep track of credit history

Answer 23

• equifax
• experian
• transunion

Question 24

factors that determine your credit score

Answer 24

• payment history
• amounts owed
• length of credit history
• new credit

Question 25

most important factor when determining your credit score?

Answer 25

payment history

Question 26

range for credit scores

Answer 26

300 to 850

Question 27

How long information stays on your credit report

Answer 27

7 years

Question 28

How often are you entitled to get a free credit report?

Answer 28

every 12 months

Question 29

relationship between credit history, credit report, and credit score.

Answer 29

Your payment history, the amount of debt you owe and the length of your credit history are all factors that contribute to your credit score.

Question 30

minimum requirement to avoid Private Mortgage Insurance

Answer 30

20%

Question 31

federal student loans

Answer 31

• fixed interest rate
• government may pay interest while attending school

Question 32

private student loans

Answer 32

• mostly from banks
• higher interest rates
• charged interest entire time

Question 33

secured loan

Answer 33

a loan in which the borrower pledges same asset as collateral

Question 34

unsecured loan

Answer 34

issued and supported only by the borrower’s creditworthiness

Question 35

what is a co-signer

Answer 35

a person who agrees to be legally responsible to pay a debt if the borrower does not pay back a loan as agreed.

Question 36

what information does the schumer box provide

Answer 36

summary of costs of a credit card agreement as required in marketing materials under a federal act

Question 37

advantages of credit cards

Answer 37

• building credit
• fraud protection
• expensive purchases

Question 38

disadvantages of credit cards

Answer 38

• high interest charges
• overspending
• hidden fees

Question 39

consideration when applying for a credit card

Answer 39

• APR
• minimum payment
• annual fee

Question 40

payday loans

Answer 40

short term, unsecured loan that carries high interest and fees

Question 41

chapter 7 bankruptcy

Answer 41

sell off assets to clear debt

Question 42

chapter 13 bankruptcy

Answer 42

keep most assets using repayment program