Credit Reports & Scores
What is a credit report?
A record of someone's credit history
What is interest?
The cost of borrowing money.
What is collateral?
Property used to secure a loan.
What does FCRA stand for?
Fair Credit Reporting Act.
What is principal?
The original amount borrowed.
What is a credit score?
A three-digit number that represents a person's credit risk.
What is a minimum payment?
The smallest required payment due on a credit card.
Is an auto loan usually secured or unsecured?
Secured.
Which law protects consumers from unfair debt collection practices?
Truth in Lending Act (TILA).
What is a loan term?
The amount of time allowed to repay a loan.
What is the difference between a credit report and a credit score?
A credit report shows detailed borrowing history, while a credit score summarizes credit risk.
Why is paying only the minimum payment costly?
It takes longer to pay off the debt and increases the amount of interest paid.
What is an unsecured loan?
A loan that does not require collateral.
Which law protects consumers against credit discrimination?
Equal Credit Opportunity Act (ECOA).
What generally happens to monthly payments when the loan term increases?
Monthly payments generally decrease.
Name two things that can negatively affect a person's credit score.
Late payments, high credit card balances, defaults, and collections.
Which credit card is more expensive: one with a 9% APR or one with a 15% APR, assuming everything else is equal?
The 15% APR credit card
What can happen if someone stops paying a secured car loan?
The lender may repossess the vehicle.
Which law protects consumers when disputing credit card billing errors?
Fair Credit Billing Act (FCBA).
Which loan generally costs more in total interest: a 3-year loan or a 6-year loan with the same APR?
The 6-year loan.
What should someone do if they find an unfamiliar account on their credit report?
Dispute the unfamiliar account with the credit reporting agency and investigate it.
Why does carrying a credit card balance and paying only the minimum increase borrowing costs?
Interest continues accumulating while the balance remains unpaid.
Why might an unsecured loan have a higher interest rate than a secured loan?
The lender takes on more risk because there is no collateral.
A debt collector threatens to have someone arrested for an unpaid debt. Which law protects the consumer?
Fair Debt Collection Practices Act (FDCPA).
Why might a loan with a lower monthly payment actually cost more overall?
Because the borrower makes payments over a longer period and generally pays more interest.