Credit Basics
What is credit?
Credit is a way of buying things where the obligation to pay is at a later date, typically the same day of each month.
Revolving Credit
Name some common credit card networks?
Visa
Mastercard
Discover
American Express
What is interest?
The fee for borrowing money.
What is a credit score?
A number which tells lenders how trustworthy you are for a loan.
What is a loan?
A loan is money given to a borrower by a lender. This is typically repaid over time with an interest rate added on.
What kind of debt has a fixed number of payments over time?
Installment Debt
Why are credit cards good for people who travel a lot?
You can earn points for traveling and you can buy things when cash is not an option
What is APR?
Annual Percentage Rate
What is the range for typical credit scores?
400-800
What is a promissory note?
A promissory note is a legal document which outlines the terms of a loan and which obligates the borrower to repay the amount agreed.
Student loans
Car loans
Mortgages
What are some risks of using credit cards?
if you overuse them you can get into debt and it can ruin your credit.
What is the difference between variable and fixed interest?
Variable can change over the course of a loan, fixed cannot.
What is the most important factor in determining credit score?
Repayment history
What is principal in a loan?
The principle is the original amount of money which has been borrowed.
What is revolving credit?
credit which can be paid off and used over and over again.
What should you do if you cant pay off your credit card bill?
Set up a repayment strategy right away.
What is amortization?
Paying off a loan over time with regular payments.
How often can you request a credit score?
Once per year per major agency
What is a Schumer box?
It is a way to disclose fees, interest rates, and the terms of a credit card.
What is the difference between installment vs revolving credit?
You can reuse revolving credit, you cannot for installment debt.
What are some fees seen on credit cards?
Late fees
Annual fees
What do payments mainly go towards early on in an amortized loan?
Interest
Why should you check your credit report?
You can catch errors and identity theft