Credit Scores
How do banks use credit scores?
They assess a borrower's creditworthiness and risk level.
What is the debt snowball method?
Paying off debts from smallest to largest to build momentum.
What group of people will receive higher interest rates on credit cards? Why?
Young people. Because they have no history of payments. They are a higher risk to the lender.
Give an example of a Secured loan.
Home, Car, Boat
How are consumer protection agencies funded?
By taxpayer dollars and sometimes through fines.
What affects your credit score?
Payment history, credit utilization, length of credit history, and types of credit.
How can you avoid falling into debt?
By creating a budget, living within your means, and avoiding unnecessary credit.
Why should you check your credit report?
To identify errors or signs of identity fraud.
What is collateral?
An asset pledged by a borrower to secure a loan.
How can you dispute errors on your report?
By contacting the credit bureau and providing evidence of the error.
What is a secured loan?
A loan backed by collateral to reduce the risk for the lender.
What is a credit counseling service?
A service that assists individuals in managing their debt and improving their financial situation.
What is a cash advance fee?
A fee charged when withdrawing cash using a credit card.
Give an example of an unsecured loan?
Personal Loan, Credit Cards
What is the most important piece of information a consumer needs to protect?
Social Security number
What are the consequences of a low score?
Higher interest rates, difficulty obtaining loans, and potential denial of credit.
How do predatory lenders operate?
By targeting vulnerable individuals with high fees and terms that are difficult to repay.
How do credit cards generate profit?
Through interest charges and fees on unpaid balances.
What determines how much we will pay on a loan.
Interest Rate and Loan Term (which includes the principal)
How long does a negative remark stay on your credit report?
How do lenders assess risk?
Through credit scores, income verification, and debt-to-income ratios.
What does 30/60/90 represent on your credit report?
Days Late
What are the benefits of using credit responsibly?
Builds credit history, rewards, and financial flexibility.
What is the range of credit scores?
300-850
A sub charge is what type of fee?
Merchant Fee