Types of Credit
What are the two types of credit?
Revolving & Installment
The amount of money you pay upfront when purchasing a car
Down payment
What is a mortgage?
A loan to buy a home
What does a credit score represent?
A number that shows how likely you are to repay borrowed money.
What is bankruptcy?
A legal process to relieve someone from debt they can’t repay
Name one example of installment credit.
Car loan, mortgage, student loan, personal loan
This is the length of time you have to repay the auto loan.
Loan term
This professional helps buyers find and purchase a home.
Real Estate Agent
What is the typical credit score range in the U.S.?
300 to 850
What is foreclosure?
When the bank takes back possession of a home due to missed mortgage payments
This is the cost of borrowing money, usually expressed as a percentage.
Interest
What’s the difference between buying and leasing a car?
Buying = own the car; Leasing = long-term rental with return
Name three things lenders look at when deciding if you qualify for a mortgage.
Credit score, income (pay stubs/tax returns), debt-to-income ratio, employment history, bank statements
How often can you check your credit report for free?
Once a year from each bureau
How long can a bankruptcy or foreclosure negatively affect your credit score?
7 years for foreclosure, 7-10 for a bankruptcy (depending on the type of BK)
What is the difference between secured and unsecured credit?
Secured has collateral, unsecured does not
What extra costs should you consider besides the car price
Taxes, fees, insurance, interest, maintenance/gas
Name at least three factors that impact the sales price of a home.
Year built, number of bedrooms & bathrooms, square footage, location (city/state), neighborhood comparables, upgrades/updates,
What are the three main credit reporting agencies?
Equifax, Experian, TransUnion
What’s the difference between Chapter 7 and Chapter 13 bankruptcy?
Chapter 7 = liquidation (selling off assets); Chapter 13 = consolidation/repayment plan (keep assets and repay the debts)
This term refers to the maximum amount you can borrow on a credit card.
Credit Limit
Bad Debt - Depreciation
If a buyer puts down less than 20% on a home, they may be required to pay this additional insurance.
Private Mortgage Insurance (PMI)
Explain how factors such as credit history length, new credit inquiries, and the diversity of credit types work together to determine your credit score.
A longer credit history demonstrates reliability over time, while new inquiries and numerous recently opened accounts can signal risk, potentially lowering your score. A healthy mix of credit types—revolving and installment—shows that you can handle different kinds of debt responsibly.
Bankruptcy and foreclosure are two of the worst things you can have impact your credit. In what instance would a bankruptcy filing be a benefit to someone?
A Chapter 13 bankruptcy filing (in many instances) help a borrower who is facing foreclosure to keep possession of their home.