The Basics of Credit for Consumers



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STUDENT NOTES

The Basics of Credit for Consumers

The Basics of Credit for Consumers

________________________________________________________________

________________________________________________________________

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?

    • _____________________________________________
  • 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.





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






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




  • Installment credit

  • Interest

  • Noninstallment credit

  • Pharming

  • Phishing

  • Pretexting

  • Principal

  • Revolving open-end credit

  • Shoulder surfing

  • Skimming






  • 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


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