CREDIT
Fall 2007
CAN YOU DEFINE THESE TERMS?
• CREDIT-• CREDITOR-• PRINCIPAL--
What are four types of credit?
• CASH CREDIT/SALES CREDIT • SECURED/UNSECURED CREDIT • CLOSED-END/OPEN-END CREDIT
• SINGLE-PAYMENT/INSTALLMENT CREDIT
What are the PROS OF CREDIT?
1. T____
2. C____ 3. F____
What are the CONS OF CREDIT?
1. I____ 2. I____ 3. O____ Others drawbacks include: 4. S____ 5. I____ 6. O____ 7. R____
When should you use credit?
Response:
QUALIFYING FOR CREDIT
• Three C’s of Credit 1. C 2. C 3. C • Credit History
On-line Credit Application
• Credit Application (on-line Credit One) --employment --residence --home ownership --housing costs --credit references --collateral --bank references
• Federal Law
EQUAL CREDIT OPPORTUNITY ACT
• Equal chance to obtain credit
• Cannot discriminate based on --s --m --r --n --r --i --a
CREDIT REPORTING AND RATING
• Where do credit bureaus get info? • What are the three national credit reporting agencies? • What items are included on a credit report? • What is the difference between a credit rating and a credit score?
ESTABLISH/MAINTAIN CREDIT
• First Time Credit 1. Open checking/savings 2. Put utility bill in your name 3. Apply for credit card from local store
What is a cosigner?
FAIR CREDIT REPORTING ACT
Explain the purpose of the Fair Credit Reporting Act.
TYPES OF CREDIT CARDS
• PRIVATE LABEL/GENERAL PURPOSE • REVOLVING/CHARGE
COMPARING TERMS
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. A A W C M G M O C S
TRUTH IN LENDING ACT
• Explain the Truth in Lending Act.
USE CREDIT CARDS WISELY
• • • • • • Credit limit is the MAX, not a goal Save receipts Set your own limit Pay balance in full Make the largest payment possible Pay bills on time
REVIEW THE MONTHLY STATEMENT
Why should you compare your credit card statement with your receipts?
Fair Credit Billing Act
• Why should you write a letter? • To whom should you write the letter? • What is the time limit that the letter has to reach the credit card company? • What should be included in the letter? • How long does the creditor have to respond? • What happens when the party at fault is determined?
Taking Out a Loan
Define: consumer finance company loan shark down payment balloon payment acceleration clause add-on clause right of recission
HANDLING DEBT PROBLEMS
• • • • • • Dangers of Excess Debt Collections Methods Repossessions/Shut-offs Collections Agencies Judgments/Liens Garnishments
Climbing Out of Debt
• • • • • W S C D B 1. Chapter 7 2. Chapter 13
Credit Card Disclosure
5. If you are late in making a payment, how much will you be charged? 6. A friend of ;yours bought the same game system at another store. The monthly loan rate was 1.7%. Who got the better deal—you or your friend? 7. You sell a short article to the local newspaper for $100. You would like to use the money to pay off the loan early. Will you benefit or lose by doing so? Explain.
CREDIT CARD DISCLOSURE
1.What is the monetary cost of credit in this situation? 2.What was the purchase price of the video game system? Explain. 3. What is the total amount you will have paid for the game system by mid-August? Assume you make all your payments on time. Show your calculations. 4. How long will it take to pay for the game system in full?
Credit Card Statement
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6.
What kind of credit card is this? How can you tell? What type of credit arrangement is being offered? How can you tell? Which of the methods described in your textbook was used to calculate the finance charge? How much interest is the store charging, 1.8% or 21.6%? Explain. Suppose the balance on this account was $27 for the entire month. What would be the amount of the finance charge on the next bill? Why? How can the cardholder avoid paying additional finance charges? Be specific.
CREDIT CARD DISCLOSURE
8. This disclosure form has a space for the borrower to sign up for credit life insurance. A. Who pays for the credit life insurance? How can ;you tell? B. Why do you think someone would want credit life insurance when taking out an installment loan?