Credit Basics
This is the amount borrowed after a down payment is subtracted.
What is principal?
Both debit cards and credit cards can be used for this type of purchase.
What are online or in-store purchases?
If your credit limit is $8000 and your balance is $7250, this is the most you can still charge.
What is $750?
Leasing a car means you do this instead of owning it.
What is return it after a fixed period of time?
The Snowball Method focuses first on this type of debt.
What is the debt with the lowest balance?
These two categories make up most of your credit score.
What are payment history and credit utilization?
This type of loan includes mortgages, auto loans, and student loans.
What is an installment loan?
A “no annual fee” credit card is not truly free because of this.
What is interest charged through APR?
Jordan has two choices for buying a laptop:
This choice would MOST likely cost Jordan less money overall.
What is paying upfront in cash?
Antonio buys a $29,000 car and puts $4,000 down. This becomes his loan principal.
What is $25,000?
The Avalanche Method focuses on debt with this kind of interest rate.
What is the highest interest rate?
Avoiding these will improve your payment history.
What are late payments?
This type of borrowing is NOT considered an installment loan.
What is a credit card?
Paying only this amount on a credit card bill keeps many people trapped in debt.
What is the minimum payment?
Compared to making only the minimum payment on a credit card, this strategy will usually help you pay LESS interest over time.
What is paying more than the minimum payment each month?
Mortgages usually cost more in total interest because of these two factors.
What are a high principal and a long term?
Paying more than the minimum payment saves money because you pay less of this overall.
What is interest?
Using some available credit responsibly helps build this.
What is your credit history?
a three-digit number (ranging from 300 to 850) that predicts how likely you are to repay debt, acting as a standard measure of credit risk for lenders. Developed by the Fair Isaac Corporation
What is FICO score?
When you only make minimum payments, most of your payment goes toward these two things.
What are interest and finance charges?
Compared to a 72-month auto loan, a 48-month loan reduces these two things
What is less costly overall and/or has reduced interest paid?
A major reason people choose a 30-year fixed-rate mortgage is because it offers these kinds of payments.
What are low, predictable monthly payments?
Someone trying to eliminate debts as quickly as possible might choose this repayment strategy.
What is the Snowball Method?
A high credit utilization ratio usually has this effect on your credit score.
What is lowering your credit score?
Opening several new credit cards without spending money on them would likely have this effect on your net worth in the short term.
What is little or no effect?
A credit card company gives you this when you open an account (not the card).
What is a line of credit?
A larger down payment does this to your monthly payment?
What is reduces it?
Choosing a mortgage with this feature would MOST likely increase the total amount Danya pays over the life of her home loan.
What is a higher APR (interest rate)?
This kind of debt allows the lender to seize the item if payments are not made.
What is secured debt?
Someone with excellent credit will usually receive this kind of loan interest rate.
What is a lower interest rate?
This financial term describes the yearly cost of borrowing money, including interest and fees.
What is APR?
The biggest advantage of paying your balance in full each month is this.
What is avoiding all interest and fees?
Improving your credit score before applying for a car loan will most likely help you get this.
What is a lower interest rate?
Compared to purchasing a vehicle, leasing does NOT give you this at the end of the agreement.
What is the ownership of the vehicle?
An auto loan is considered this type of debt because the vehicle can be repossessed.
What is secured debt?
This term describes how much of your available credit you are currently using.
What is credit utilization?