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
EQUAL CREDIT
OPPORTUNITY ACT
• Federal Law
• 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. A
2. A
3. W
4. C
5. M
6. G
7. M
8. O
9. C
10. 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
1. What kind of credit card is this? How can you
tell?
2. What type of credit arrangement is being offered?
How can you tell?
3. Which of the methods described in your textbook
was used to calculate the finance charge?
4. How much interest is the store charging, 1.8% or
21.6%? Explain.
5. 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?
6. 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?