Unit 2 Study guide Flashcards
Default
Failure to pay debt/other obligation.
Diversification
Spreading your money among different investments to reduce the risk of losing it.
Repossession
Things that were bought but not paid for are taken back.
Bankruptcy
If somebody is unable to pay a loan or debt, they will file for bankruptcy to create a repayment plan.
401 (k)
A retirement savings plan offered by employers.
Roth IRA
A retirement plan that has no age restriction. It is contribution taxed but not withdrawal taxed.
Lien
A right to keep property from someone until a debt is repayed.
Garnishment
A persons earnings are withheld to satisfy a debt.
Stock
A share of a company.
What are the 3 C’s of credit?
Character, Capital, Capacity.
Character
Your reputation as a reliable and trustworthy person. Example: Do you pay your bills on time?
Capital
Your assets used as a guide to determine your ability to repay the debt. Example: Do you own things of value?
Capacity
Your ability to pay back the loan. Example: Will you make enough to pay the debt?
What percentage of your paycheck should go towards credit card payments?
10% - 12%
What is the average American credit card debt?
$16,061
What does a credit score measure?
The level of risk the company is taking by giving you a loan.
Poor Credit Score
300-579
Fair Credit Score
580-669
Good Credit Score
670-739
Very Good Credit Score
740-799
Exceptional Credit Score
800-850
How can a person improve their credit score?
Pay all bills/debts, and contact credit company and ask how to build it back up.
The 3 Credit Reporting Agencies
Equifax, TransUnion, Experian
What are 3 factors that determine credit history?
Payment History, Credit Utilization, Length of Credit HIstory/.
If you only pay the minimum balance on your credit card each month, what will happen to it?
It will increase.
What are 3 ways to avoid Idenity Theft?
- Shred all papers with your information on them.
- Don’t carry your social security card with you.
- Use different passwords on all your accounts.
What is the best wat to avoid going into a debt?
Paying all loans/bills on time.
How long does Chapter 13 bankruptcy stay on your credit report?
7 years.
How long does Chapter 7 bankruptcy stay on your credit report?
10 years.
What is the purpose of investing?
To make money overtime, to make your money work for you.
What is a mutual fund?
Made up of many investors and managed by a group of professionals. Your money is spread throughout various stocks and bonds. Reduced Risk.
Government Bond
No risk and low return
Corporate Bond
Moderate risk and moderate return
Stocks
High risk and high return
