Credit Flashcards
(13 cards)
Credit card cash advances
provided by credit card companies - withdraw cash with credit card - you pay a higher interest
Truth in Lending Act (Consumer Credit Production Act)
Legislation enacted in 1968 requiring money lenders to be explicit about the true cost of credit transactions. The Truth-in-Lending Act also outlaws the use of threatened or actual violence to collect debts
Consequence of paying the minimum payment due on a credit card bill or paying a bill late
impacts credit score if paid late. If you are only paying minimum payment each month you will take a much longer time to pay off balance – you will greatly increasing the total amount paid back due to APR charged per month.
How does the degree of risk influence the interest rate charged for credit
if you have a low credit score, it demonstrates you are a poor credit risk, and you will pay a much higher interest rate on loans
Debt to Credit Ratio
A credit-to-debt ratio is the amount of available credit you have relative to the amount of debt you carry.
Credit Reports
is a number representing the creditworthiness of a person, and the likelihood that person will pay his or her debts. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers.
Consequence of a lost or stolen credit card
if unauthorized charges are made with your credit card before you report it lost or stolen, the maximum amount you can be liable for is $50. If the charges are made after you report the card lost or stolen, you have no liability. If you don’t report card after it is lost or stolen, you have full liability to pay back charges.
Three leading credit reporting agencies
Equifax, TransUnion, Experian
The length of debt repayment and impact on cost
the longer you take to pay back a loan, the more you will pay in interest and principal overall.
What to do if a person thinks he/she is a victim of identity theft
contact banks and cancel all credit card/debit cards, review bank accounts to see if there are recent charges/purchases on accounts, contact all 3 credit bureaus to report identity stolen, apply for new social security card
Characteristics of predatory loans
making loans to customers who are poor credit risk (low credit scores) and making those customers pay extremely high interest rates
Collateral (secured vs. unsecured loans)
collateralized/secured loans use an item (house, car, appliances, etc…) to guarantee the loan. An unsecured/uncollateralized loan is a personal loan – secured only by someone’s good credit score.
Pawnshops
Collateralized loans – the loan is collateralized/secured by the item (musical instruments, jewelry, etc…) you bring in order to get a loan from the pawnshop. You pay interest on the loan and a type of fee.
