Credit Vocab I
Receiving money to buy goods and services with the promise that you will pay for them in the future
Credit
A card that allows you to transfer funds from your bank's checking account to a retailer
Debit Card
What is the approximate interest rate for the following:
Auto Loan -
Mortgage -
Credit Cards -
Auto Loan: 6-8%
Mortgage: 6-8%
Credit Card: 19-24%
What is the numerical range for a credit score?
300 - 850
Why would someone use credit?
Need to purchase something right away
Need to spread out payments
(will accept: rewards, but this should not be the main reason most people use credit)
The original amount you borrow
What is one difference between a Bank and a Credit Union?
Credit Union owned by members, bank owned by stockholders
Credit Unions sometimes offer better rates
Banks can have more locations
Other possible choices...
A type of loan that is paid in consistent intervals (every month) for the same amount until the debt is paid off.
What are 2 things people do that hurt their credit score? (think credit score killers)
Not paying bills on time
Maxing out credit cards
Debt settlement
Forclosure
Bankruptcy
What is your number one responsibility as a borrower using credit?
Pay back the debt on time!
The amount the borrower must pay for the use of someone else’s money
Interest
When you apply for a mortgage, who determines how much you can afford to pay per month?
Both the BANK and YOU determine how much you can afford
A debt owed on real property that is usually paid off over a period of 15-30 years
Mortgage
Name 3 of the 5 factors that determine a credit score
1) payment history / pay bills on time
2) debt-to-credit ratio / how much debt you have versus how much credit you are offered
3) length of time with credit
4) types of debt
5) newly acquired debt
What are 3 questions you should ask yourself before using credit?
Do I really need this item?
If I pay cash, what will my opportunity cost be?
If I use credit, will my utility be greater than the interest?
Have I done comparison shopping for credit?
Can I afford to borrow or use credit now?
The cost of credit as a yearly percentage
Annual Percentage Rate (APR)
What is the difference between a credit card and a debit card?
Secured loan is backed by collateral, while an unsecured loan is only backed by your promise to repay the debt
720
Give 1 example of BAD DEBT
Good Debt - Mortgage, Auto Loan, Student Loans
Bad Debt - Credit Cards
The amount of your personal wealth that can be used to "secure" loans
Collateral
Research done to determine whether or not a lending institution (bank/credit union) should loan money to you?
Credit Check
What is revolving debt, and give an example?
Debt with different amounts due each month, such as credit card debt.
What is the national average for a credit score?
717
What are two ways you can start to build your credit?
Get a bill in your name