Credit Basics
This financial concept allows a person to purchase something now and repay the cost later, usually with interest.
What is credit?
This “C” refers to your reputation for paying debts on time.
What is character?
his three-digit number summarizes your creditworthiness based on information in your credit report.
What is a FICO score?
This is the maximum amount you can charge on a credit card account.
What is a credit limit?
This law prevents lenders from discriminating against applicants based on factors such as race, religion, or gender.
What is the Equal Credit Opportunity Act?
This financial obligation represents money that must be repaid to a lender and usually includes principal and interest.
What is debt?
This “C” measures whether your income and existing debts allow you to repay a loan.
What is capacity?
These organizations collect financial information from lenders and create the reports used to calculate your credit score.
What are credit bureaus?
This period allows cardholders to pay their balance without being charged interest.
What is a grace period?
This law ensures lenders clearly disclose interest rates and borrowing costs to consumers.
What is the Truth in Lending Act?
Mortgages, auto loans, and student loans are examples of this type of credit where payments are made on a fixed schedule.
What is an installment loan (or installment credit)?
Owning valuable assets or having savings that could help repay a loan reflects this “C” of credit.
What is capital?
Opening several new credit accounts in a short period can negatively affect this part of a credit score.
What is new credit?
The percentage cost charged for borrowing money on a credit card is called this.
What is interest?
This law regulates who can access your credit report and ensures accuracy in credit reporting.
What is the Fair Credit Reporting Act?
Credit cards are an example of this type of credit where borrowers can repeatedly use funds up to a limit and repay varying amounts.
What is revolving credit?
If someone loses their job and income drops significantly, this “C” of credit would most likely be affected.
What is capacity?
This factor has the largest influence on a FICO score.
What is payment history?
The section of a credit card statement that lists all purchases and charges made during the billing cycle is known as this.
What are transactions?
Loans offered to borrowers with poor credit scores often carry extremely high interest rates and fall into this category.
What are subprime loans?
A borrower with little or no credit history asks another person with stronger credit to sign the loan agreement as well. If the borrower fails to repay the loan, this person becomes legally responsible for the debt.
What is a co-signer?
A borrower who consistently pays bills late would damage this “C,” making lenders less likely to approve a loan.
What is character?
Two borrowers have identical incomes and debt amounts, but one consistently pays every bill on time while the other occasionally pays late. Because of this factor, the first borrower will likely have the higher credit score.
What is payment history?
If a borrower pays only the minimum payment every month, this financial consequence will increase over time.
What is the total interest paid?
A legal process that allows individuals overwhelmed with debt to eliminate or restructure their obligations is called this.
What is bankruptcy?