Credit & Credit Scores
Does it mean to use credit?
Borrowing money with the promise to repay it later
What does principal balance mean?
The original amount borrowed
sing the 50/30/20 rule, what percentage goes to wants?
30%
What is gross pay?
Total earnings before deductions
What is the difference between credit and debt?
Credit is the ability to borrow; debt is the amount owed
What should be your last option when paying off debt?
Bankruptcy
Maria earns $2,000/month. If she uses a 50/30/20 method, how much can she spend on wants?
$600
What is net pay?
The actual amount of money an employee receives after all deductions (take home pay)
What is a benefit of having a high credit score?
Lower interest rates, lower insurance premiums, Higher Credit Limits, Easier rental approvals
Which method focuses on paying off the smallest balance first?
Snowball method
Jordan earns $1,800/month and spends $1,350. How much is left?
$450
What is opportunity cost?
the value of the next best alternative you give up when making a choice
What makes up the largest portion (35%) of your credit score?
Payment history
Which method focuses on paying off the highest interest rate first?
Avalanche method
Alex earned $12,500 in wages and $350 in interest income last year. What amount should Alex report as Total Income on Form 1040?
$12,850
What is inflation?
a general increase in prices and fall in the purchasing value of money
Name one of the three major credit bureaus?
Equifax, Experian, TransUnion
Which method saves the most money on interest over time?
Avalanche method
What is the formula for net pay?
Gross pay – taxes – deductions = net pay
An investment is...
Putting money into assets like stocks, bonds, or real estate with the expectation of generating a future profit or return.