Unit 5 Flashcards
Credit score breakdown
35%: Payment history 30%: How much available credit you are actually using 15%: Length of time you’ve been in debt (length of relationship with creditors 10%: How much new debt 10%: Type of debt (mortgage, credit card, etc.)
Examples of Installment credit
Car loans or home loans
Credit Score Range
800 to 850: Excellent Credit Score
740 to 799: Very Good Credit Score
670 to 739: Good Credit Score
580 to 669: Fair Credit Score
300 to 579: Poor Credit Score
Snowball Method
Organize debt by lowest to highest and pay the smallest debt ($ value) first
Avalanche method
Pay debts in order of interest rate, starting with the highest.
Debt collector
a person or company hired by a creditor to collect the overdue balance on an account
What can and can’t debt collectors do?
- Can contact you by phone, email, or physical mail - Cannot contact you directly at work or outside the hours of 8 am to 9pm.
Subsidized Student Loan
This is a type of federal student loan on which the government pays the interest that accrues while a student
is in school.
Unsubsidized Student Loan
This is a type of federal student loan on which the government does not pay the interest that accrues while a
student is in school.
Mortgage
a specific type of loan that is used to buy real estate (home or other form of property)
Revolving credit
an account on which the account holder can charge repeatedly up to a maximum limit, no term limit.
Installment credit
a loan repaid with interest in equal periodic payments, term limit varies.
3 C’s of Credit
Character, Capacity, Capital
Character
honesty, willingness to pay debts, FICO credit score
Capital
assets you own (collateral)
Capacity
earning power and debts, work history, education
Credit Score
A measure of an individual’s credit risk; calculated from a credit report using a standardized formula
Credit Report
A detailed report of an individual’s credit history
Safe Debt Rule
Don’t spend more than 10% of monthly income on debts.
Debt consolidation
The act of combining all debts into one monthly payment, typically extending the terms and the length of time required to repay the debt.
Secured Credit
Credit that is backed by a pledge of property (collateral)
Unsecured Credit
Credit without collateral, such as credit cards.
Premium
It’s the cost you pay (monthly, quarterly, or yearly) to maintain your insurance coverage
Deductible
A deductible is the amount you pay out-of-pocket before insurance kicks in.
Collision coverage
Coverage that pays to repair or replace your car if it’s damaged in an accident with another vehicle or object
Liability coverage
covers the property damage or injuries you may cause others in a crash
Comprehensive coverage
Covers natural disasters and accidents not related to collsions
