Types of Credit
What is a credit card considered: revolving or installment credit?
Revolving
What’s a down payment?
The amount of money you pay upfront when purchasing a car
What is a mortgage?
A loan to buy a home
What does a credit score represent?
A number that shows how likely you are to repay borrowed money.
What is bankruptcy?
A legal process to relieve someone from debt they can’t repay
Name one example of installment credit.
Car loan, mortgage, student loan, personal loan
What is the benefit of getting pre-approved for a car loan?
Know your budget, faster process, better negotiation power
What is a fixed-rate mortgage?
Interest rate stays the same for the life of the loan
What is the typical credit score range in the U.S.?
300 to 850
What is foreclosure?
When the bank takes back possession of a home due to missed mortgage payments
What does APR stand for and why is it important?
Annual Percentage Rate - (it tells you how much you’ll pay in interest annually)
What’s the difference between buying and leasing a car?
Buying = own the car; Leasing = long-term rental with return
What is PMI and when do you have to pay it?
Private Mortgage Insurance – required when you put less than 20% down
How often can you check your credit report for free?
Once a year from each bureau
How long can a bankruptcy or foreclosure negatively affect your credit score?
7 years for foreclosure, 7-10 for a bankruptcy (depending on the type of BK)
What is the difference between secured and unsecured credit?
Secured has collateral, unsecured does not
What extra costs should you consider besides the car price
Taxes, fees, insurance, interest, maintenance/gas
Name two things lenders look at when deciding if you qualify for a mortgage.
Credit score, income (pay stubs/tax returns), debt-to-income ratio, employment history, bank statements
What are the three main credit reporting agencies?
Equifax, Experian, TransUnion
What’s the difference between Chapter 7 and Chapter 13 bankruptcy?
Chapter 7 = liquidation (selling off assets); Chapter 13 = consolidation/repayment plan (keep assets and repay the debts)
Discuss the advantages and disadvantages of revolving credit (like credit cards) versus installment credit (like auto loans or mortgages)
Revolving credit offers flexibility and potential rewards when managed well, but carries the risk of accumulating high-interest debt if not used responsibly. In contrast, installment credit has fixed repayment terms that can aid in building a stable credit history if payments are made on time.
When evaluating a car loan offer, what key financial factors should you consider beyond the sticker price, and how do these factors affect the total cost of your vehicle over time?
Interest rate, loan term, any origination or processing fees, and the potential for prepayment penalties. A lower APR and a shorter loan term generally minimize the interest paid over the life of the loan, thereby reducing the total cost. Also, understanding additional fees and penalties can prevent hidden costs that increase the overall expense, ensuring that the car remains affordable in the long term.
Year built, number of bedrooms & bathrooms, square footage, location (city/state), neighborhood comparables, upgrades/updates,
Explain how factors such as credit history length, new credit inquiries, and the diversity of credit types work together to determine your credit score.
A longer credit history demonstrates reliability over time, while new inquiries and numerous recently opened accounts can signal risk, potentially lowering your score. A healthy mix of credit types—revolving and installment—shows that you can handle different kinds of debt responsibly.
Bankruptcy and foreclosure are two of the worst things you can have impact your credit. In what instance would a bankruptcy filing be a benefit to someone?
A Chapter 13 bankruptcy filing (in many instances) help a borrower who is facing foreclosure to keep possession of their home.