Credit Basics
Credit involves borrowing money, or the ability to receive goods & services today with the promise to pay it back in the future. It is not really a promise but a legal obligation.
What is a credit card?
Revolving line of credit established in advance.
What is a credit score?
Three digit number that determines the trustworthiness of a consumer.
How many times per year can you do a hard check your credit score without damaging?
once per year from each of the agencies.
Who is Mr. English?
The GOAT business teacher.
What are positive credit behaviors?
- very intentional when we use credit
- Seek credit sparingly
- Pay bills on time and in full
- Monitor credit usage
What are benefits of using a credit card?
-Convenient payment tool
- Offer consumers fraud protection
- Good tool for establishing credit
- Some consumers like the rewards program
- Earn free miles, discounts on hotels/merchandise
- Cash back but ALL require the consumer to spend money in order for them to receive benefits.
What is the most common FICO credit range?
300-850
What is a w2?
It reports annual earnings and taxes withheld.
Where did Mr. English go to college?
Northeastern
What are examples of negative credit behaviors?
-Missing payments will drop credit score rapidly.
-Late payments.
-Having too much of one type of credit such as credit cards.
-Chasing rewards such as points, airline miles, or cash back from spending is dangerous and not worth the benefits.
- small purchases (paid in full) when bill comes
- having a mixture of credit
What are the 3 Credit agencies?
- Equifax
- Experian
- TransUnion
What is a credit report?
A record/statement of a person's use of credit that reflects information about current credit condition.
What happened to AIG in 2008?
Financial crisis
What are 2 sources of credit?
- insurance companies
- banks
- merchants
- government
What are credit card drawbacks?
- Charge daily compounded interest
- Charge high rates for credit
- High fees
- Penalties for bad behavior
No
How old do you have to be to apply for a credit card?
21 years old, 18 can have a co-signer.
- Revolving credit
- installment credit
What is a Schumer box?
A box to help consumers better understand the cost of credit, to allow them to help compare different credit.
What happens if credit had never been used or reported?
There will not be a credit report/score.
Aligned with the business cycle of rising and falling of economic activity.
Who invented the credit card?
Frank McNamara