Credit Basics
What is credit?
Money that is loaned to you, paid back with interest when payments are made over time, a way to buy now and pay later, availability is based on your borrowing history
What is a late payment fee?
A fee charged if the minimum payment is made after the payment due date.
What is a credit report?
A record of how you have repaid your debts that lenders report to the 3 credit reporting agencies.
What is a credit score?
A rating based on the information in your credit report. It represents your creditworthiness or how likely you are to pay back a loan on time.
What is a credit card?
Using a credit card is like taking out a small loan to make a purchase. Cards used to make purchases using the card issuer's money.
What is available credit?
The amount that you have to spend (Credit limit - current balance = available credit).
How long does it take to establish your first credit score?
About 6 months (of on-time payments)
Name 2 different types of credit.
Acceptable Answers:
Auto Loans
Mortgages
Personal Loans
Student Loans
Credit Cards
What is the grace period?
The number of days between a consumer's credit card statement date and payment due date when interest is not charged.
What are the 3 major credit reporting bureaus?
TransUnion
Equifax
Experian
Name an organization or individual who can check your credit score.
Acceptable Answers
Your potential landlord.
Your insurance agent
Your employer
Lenders from whom you applied for loan
Unsolicited financial institutions who are interested in getting your business
Name 2 mistakes that can hurt your credit.
Acceptable Answers
Paying late / missing a credit payment.
Using too much credit/spending over your credit limit.
Opening too many new accounts or loans in a short period.
Not notifying creditors when you move or change names.
Not using your full legal name on financial documents.
Closing a credit card account.
What is a credit limit?
The amount of credit available on your account.
Name 2 sections that appear on a credit report.
Acceptable Answers
Personal Identification Information (PII)
Public Record Information
Collection Agency Information
Credit Inquires
Credit Account Information
Name 2 factors that DO NOT impact your credit score.
Acceptable Answers
Where you live
Your age
Your race, religion, national origin, sex, martial status
Your salary, occupation, title, employer, or employment history
List 3 benefits to using a credit card.
Acceptable Answers
Don't need to carry cash.
Make 1 payment at the end of the month for several purchases
Establish credit history
For emergencies
Add/link it to your phone
What is APR?
The annual rate that is charged for borrowing, expressed as a single percentage number that represents that actual yearly cost of funds over the term of a loan.
How often do creditors report information to the credit agencies?
30 - 45 days
What are the 5 factors make up a credit score?
Payment History
Credit History
New Credit
Types of Credit Used
Amounts Owed