Credit Basics
Borrowing money, or the ability to receive goods and services today with the promise to pay it back in the future.
Unsecured credit, no collateral associated, credit lines from a bank.
What is Open-Ended Credit?
Useful in emergencies, can be a good tool to establish credit, and offer consumers fraud protection.
What are the benefits of credit cards?
Someone who receives the balance in full and pays back later.
What is a borrower?
Short term cash advance secured by a tax payers expected tax refund.
What is a refund application loan?
Expressed and measured in terms of the interest rate. Charges daily compound interest that can add up rapidly.
What is cost of credit?
Missing payments, late payments, having too much one type of credit, chasing rewards.
What are negative credit behaviors?
A derogatory term that credit card balances in full each month. Keeps credit card utilization rate low so they do not get ridiculously high rates.
What is a deadbeat?
A formal credit check that involves pulling a customers credit report and history. Will negatively impact a credit score.
What is a hard credit check?
Reduce taxable income, money grows tax deferred, free $ and matching employer contributions.
What is 401K?
Spending in cash does and using a debit card is not a legal agreement. Does not jeopardize future discretionary income.
What are the benefits of not using credit?
Report our credit activities to the Credit Reporting Agencies.
What are types of credit?
A three digit number that reflects the likelihood that a consumer will pay their debts. Measures a consumer's trustworthiness. Does not appear on credit reports.
What is a credit score?
Contributions may or may not be tax deductible, must have earned income, when money leaves the account it will be taxed.
Family and friends, to more traditional areas like, insurance companies, mortgages, loans, retail stores, and the government (housing, small business loans, and education).
What are sources of credit?
Auto Loans, mortgages, student loans. Secured loans. Loans are based on a fixed rate of interest that does not change over the life of the loan.
A software that tells if your account is up to date without any outstanding debts. No impact on credit score. Background check.
What is a performed soft credit check?
CRA's are aware. If multiple checks come in for the same type pf credit within a 14-day period it has no impact on your credit score.
FICO is the only true credit score, checking your score is bad, affects future job opportunities, takes forever for a credit score to budge, credit cards are good for your credit score.
What are the 6 Misconceptions?
The money leftover all living expenses have been paid such as rent, mortgage, phone, cable, food, insurance, etc.
What is discretionary income?
Last resort of credit. Charge higher rates than. conventional credit. May combine elements of closed-end or open-end credit.
Credit card issuers are required to disclose the terms and fees of each credit card to offer. Consumers can review this to better understand the cost of credit so they can make easy comparisons.
What is a Schumer Box?
Most common credit scoring model. Created to be an accurate scoring model. Range from 300 to 850.
What is FICO?
35% Payment history, 30% debt amount, 15% length of credit history, 10% new credit, 10% credit mix.
What is the FICO 5?