– STUDENT NOTES
The Basics of Credit for Consumers
The Basics of Credit for Consumers
• Used properly, credit can
______
______
Types of Credit
• ______credit encourages immediate purchases of specific items.
• Non-installment credit is usually extended for ______days.
• Three places that usually issue this kind of credit are ______, ______, and ______.
• How much of the amount must the consumer pay off?
· ______
• ______is also used for specific purchases but allows the borrower more time to repay the money
• Installment loans may______
Do installment payments make the purchases cost more?
• ______
• ______allows consumers to borrow up to some preset amount such as $10,000.
• True or False. They can continue to use their credit as long as they do not exceed their credit limit. ______
Math for Personal Finance
• Barbara borrowed $2,300 to buy some furniture and is paying 15 percent interest a year for the loan. The terms of the loan do not require her to pay off any of the loan balance during the first year. She only has to make interest payments. How much interest will she pay the first year if she does no reduce the principal of the loan?
______
Advantages of Using Credit
· ______helps you make large purchases sooner.
· A good ______can make it less expensive for you to use credit in the future
Math for Personal Finance
• Harlan used his credit card—a form of short-term credit—to charge three tanks of gas this month. If his charges were $43.12, $51.87, and $38.35, how much should he pay at the end of the month?
______
Disadvantages of Using Credit
• It is often ______to get credit than it is to pay it back
• If you borrow too much money, you may have ______making the payments
• Credit cards can tempt us to purchase things ______when it would be wiser to save and pay for in full
Math for Personal Finance
• Sabrina charges $800 at the local sporting goods store to buy some exercise equipment. The store offers no interest for 90 days if the balance is paid in full, or 24 percent annually if the balance is not paid in full prior to 90 days. How much interest will she need to pay if she lets the account go for 91 days before paying the bill?
______
Credit Rights and Consumer Credit Laws
• ______prohibits creditors, people who provide credit, from denying credit based on gender, age, race, national origin, religion, and martial status.
• Within how many days are creditors required to notify applicants about their credit status?
______
Check Your Financial IQ
• Credit is convenient and can make certain purchases possible. But credit is costly and can lead to financial problems if used ______.
• What are the risks and benefits of consumer credit?
______
______
______
Building Good Credit
• Lenders often charge ______interest rates for people with less-than-good credit.
• What is one way to build good credit?
______
Your Credit History
• Each person’s credit history is collected in an ______.
• Paying for______, such as electricity and phone, also shows up on your credit history.
• Failing to pay your utility bills will ______affect your credit history.
Credit Bureaus and Credit Scoring
• ______collect credit information on individual consumers
• The three main credit bureaus are:
______
______
______
Credit Reports
• ______shows every time you have applied for credit, whether or not you have paid your bills on time, if you have paid your credit cards in full every month or carried a balance, and if you have paid late fees.\
• Everyone can access his or her credit report once every _____ months free of charge.
• ______limits the sharing of your financial information only to firms that have a legal purpose to evaluate this information.
• When you apply for credit, the potential creditor will study your report and make decisions about extending ______credit.
Credit Score
• ______a number based on your credit history that assesses your creditworthiness.
• Individuals with ______credit scores get better interest rates on loans.
• Credit scores are calculated based on a model created by
______.
• FICO scores will be between _____ and ______.
Check Your Financial IQ
• Good credit means having a credit history that is generally free of credit problems, such as ______or ______bills.
Threats to Your Credit: Identity Theft
• ______occurs when someone uses your personal information without your permission for personal gain.
• Some criminals use your personal information to establish totally new ______and engage in criminal activity.
• ______occurs when someone in a public place skims personal information to use against you by overhearing your conversation or viewing your personal information
• True or False: Identity thieves have been known to go through a person’s trash to gather information?
______
Identity Theft Tactics
· ______involves copying your credit card or debit card numbers from your cards.
· ______occurs when someone improperly accesses your personal information by posing as someone who needs data for one reason or another.
· ______is when pretexting occurs online and can include emailing you and asking you to verify account information.
· ______uses email viruses to redirect you from a legitimate website to an official looking website designed to obtain your personal information.
Protecting against and Reacting to Identity Theft
· The purchase of identity theft ______may also be worth considering.
Monitor Your Credit Report
· Report ______information to the three main credit reporting bureaus.
· The credit bureaus will contact the creditor to verify the ______of information and change it if inaccurate.
Check Your Financial IQ
• What is identity theft?
Summary
• Building good credit history is important to your ______.
• You can obtain a ______from any one of the three credit bureaus to ensure that the report is accurate.
• Identity theft is one of the ______growing crimes in our country.
Key Terms and Vocabulary
• Credit
• Credit bureau
• Credit history
• Credit limit
• Credit report
• Credit score
• Creditor
• Equal Credit Opportunity Act
• Fair Credit Reporting Act
• Fair Isaac Corporation
• Identity theft