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Terms in this set (32)
An act which requires lenders to inform borrowers of all direct, indirect and true costs of credit.
The interest rate charged in a given year
When you use a credit card, when do you actually pay the bill?
You pay the bill after that month
Is it better to get a higher APR for a credit card, or a lower APR? Why?
It's better to get a lower APR for a credit card because it will cost you less overall
What happens when you have a good credit rating (i.e. a high FICO score)
More negotiating power
Get discounts off of certain purchases
Equal Credit Opportunity Act
Law that states that you can only be judged based on your creditworthiness and nothing else
Is it better to have a Fixed or Variable credit card APR?
Fixed credit card APR→ interest rate doesn't change
Variable credit card APR→ interest fluctuates as national interest rate changes
Fixed credit card APR would be better because that way you will be paying the same amount of interest and won't have to end up paying more.
How can a cardholder avoid paying the interest fees on a credit card?
In order to avoid paying the interest fees on a credit card, you should pay your balance in full every month before the end of the grace period or try and pay it off as soon as possible.
What are the results of paying the minimum payment on a credit card every month?
hurt your credit score
Pay more on interest
Longer time to pay your debt
How will a low credit score affect someone?
It will be harder for you to make certain purchases such as an apartment because it tells the person that you don't pay your bills on time and are financially irresponsible.
Things that could cause a consumer to develop a negative credit history
Not paying your bills on time
A charge off
What is the highest percentage of your FICO score based on?
1. Payment history
2. How much you owe
3. Length of credit history
4. New credit
5. Types of credit used
Advantages of using credit
Temporary expansion of income
Builds up your credit score
Does the law allow you to receive a free credit report from each of the three major credit bureaus each year?
You are entitled to get a free credit report from each of the three major credits every year.
Can businesses obtain your credit report when you apply for a job or insurance?
Yes, they can look at your credit report when replying for a job in order to get a good idea of who you are.
If your credit card is lost or stolen, should you report it to the credit card agency?
Yes, you should report it to the credit card agency, so that way they can freeze the card and no one can use your card.
If you are denied credit, are you allowed to ask for an explanation from the creditor as to why you were denied?
Yes, you are able to ask the creditor for an explanation because the Equal Credit opportunity ensures you that you can ask for an explanation within 60 days.
If you were shopping online, is it safer to use a credit card or a debit card?
It's safer to use a credit card because at the end of the month if there is some type of fraud you can tell your credit card company that those expenses weren't from you, and you will get your money back.
What does a credit rating describe about a person?
Whether they pay their bills on time and are financially responsible.
The maximum amount of charges allowed to an account
Open-Ended (Revolving Credit) - What is this? Examples?
credit as a loan with a certain limit on the amount of money
Ex. single purpose card (Best Buy, Kohls), credit card, visa card
Closed-Ended Credit - What is this? Examples?
A loan the borrower must repay
Ex. Home loans, car loans
Transferring debt from one credit to another
Examples of collateral when determining creditworthiness
Items you own that could be sold to help pay for your bills
Examples of character when determining creditworthiness
People of high character pay their bills on time
Examples of capacity when determining creditworthiness
The financial capabilities of paying your bills
What type of information does a credit report give
Recent credit/loan applications
Collection account (unpaid debts)
Public records (foreclosure, bankruptcy)
A person who is equally responsible for paying back debt under the credit terms
Period of time given to pay off the balance
The score ranges from 300-850 and it helps determine your rates and terms
The interest rate that may be charged right after a credit card account is opened
Cash Advance on credit cards - how much is the cost and how is it calculated?
Some use a flat amount or a percentage
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