Vocab
Interest rate is determined before loan is granted and remains constant as long as ontime payments are being made
True or False: A 30-year mortgage with the same interest rate will cost more in total interest than a 15-year mortgage.
True
What is an advantage of using a credit card?
You can make an emergency purchase that you otherwise don’t have the money to pay for right now
four main parts of a credit report
personal history
credit history
public records
credit inquiries
Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Are these cards the same?
No
What is an Authorized User?
A person who has permission to use and/or carry another person's credit card, but isn't legally responsible for paying the bill.
True or False: Closing an old credit card account that you've paid off can sometimes lower your credit score.
True
Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?
This enables the credit card company to make more money
generally considered the most important part of a credit report
credit history
Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?
Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times
What is a Secured Credit Card?
A type of credit card that is backed by a savings account used as collateral on the credit available with the card. Money is deposited and held in the account backing the card.
True or False: The Debt Snowball method saves you more money in interest than the Debt Avalanche method
False
Your friend confides in you that he has a low credit score. What is the single best way for him to improve his score?
Make on time payments
two biggest factors used to calculated credit scores
payment history
amount owed
Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, what should should she do?
Put in $5000 for your down payment, and choose a loan with a long term length
What is a Credit Limit?
the maximum amount that you may charge on your credit account
True or False: Payday loan APRs are usually above 200%
True
What is the general timeline to establish your first credit score?
3 to 6 months
consequence for bad credit
difficult to obtain credit; bad credit terms, difficulty obtaining desired apartment, job
Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. What does this tell you?
Your APR will be within that range, depending on the strength of your credit history
List debt from smallest to largest.Smallest debt gets all extra income until paid off. Larger debts only get minimum payments in meantime.
True or False: A higher credit score always means you will automatically be approved for any loan you apply for
When loans are amortized, monthly payments are _______ , while the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.
Constant, Decreases, Increases
What benefits do you receive by taking out a loan with a cosigner?
You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit
Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?
A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller