Interest Rates
finance charge or the total amount it costs per year to use credit; calculated as a percentage of the amount borrowed, including interest, transaction fees, and service charges
APR (Annual Percentage Rate)
the # f payments per year; this will always be 12 in the APR formula
Which symbol is this in the formula?
M
What are the three types of credit?
Installment, revolving, & open
What information is used to calculate a credit score?
Payment history, Amounts owed, Length of credit history, Types of credit, New credit and inquiries
A bankruptcy in which the filer cannot pay and must use their assets to pay back debt is a _________ and a bankruptcy in which the filer can pay, but needs help developing a payment plan is a __________.
Chapter 7 and Chapter 13
an interest rate paid only on the amount of money you deposit
simple interest
P × R × T
P = principal; R = rate; T = time
Finance charge formula
What institutions provide credit?
Commercial banks, savings and loans, credit unions & consumer finance companies
What are some common forms of credit?
home mortgage, car loan, college loan, personal loan, credit card
How long does a bankruptcy stay on one's credit report?
7-10 years
a loan to buy real estate, such as land or a home
mortgage
(FC + P) ÷ N
Monthly payment formula
What are the qualities that lenders look for in loan applicants; aka the "3 C's"?
Character - Can we trust that you will pay the credit back?
Capacity - Are you able to pay the credit back?
Collateral - What assets do you have to ensure your loan?
Advantage or disadvantage: Credit can help people acquire assets.
Advantage
What are the possible causes of filing bankruptcy?
Natural disasters, medical emergencies, mismanagement of money, global pandemics, etc
interest on the money deposited and the accumulated interest
compound interest
(2 × M × FC) ÷ (P × (N + 1))
APR formula
What is a FICO score?
Also known as a credit score, it's a score based on one's credit history.
What are the three credit bureaus?
When filing a bankruptcy, this debt can be wiped away and this debt cannot be.
Dischargeable and non-dischargeable
the process by which loan payments are applied to the principal as well as the interest on a loan according to a set schedule
amortization
B = (P × (1 + R))T
Compound interest formula
What is a credit report?
A person's detailed financial history that includes loans, debts owed, debts paid off, etc.
True or false: Paying your bills on time helps to establish a good credit history.
True
Examples of non-dischargeable debt
Student loans, alimony, child support