Module 1 Flashcards
(36 cards)
information collected by credit bureau
- history of accounts
- number of inquiries
- number of collections
components of credit report - personal info
consumer identification information, including name, SSN, addresses, phone numbers, and employers
components of credit report - account/trade line info
info about each consumer credit account, including payment history, account dates, credit limits, and balances owed
components of credit report - public records
items that are listed in the public record, including bankruptcy, judgments, tax liens, and wage garnishments
components of credit report - inquiries
requests initiated by a company or person for a consumer’s credit profile information
components of credit report - consumer rights
info about consumer rights and protection for reference (included in credit reports from the major reporting agencies, but not in most tri-merge reports)
indicators of good/bad credit
1) payment history
2) capacity used
3) length of credit history
4) type of credit used
5) new credit
indicators of good/bad credit: payment history
positive, negative, negative examples
Positive: timely payment history demonstrates reliability
Negative: late payment history demonstrates higher risk of future delinquency
Negative examples: lien, judgment, collection account, charge-off account, repossession, bankruptcy
indicators of good/bad credit: capacity used
positive, negative, negative examples
Positive: low credit utilization demonstrates good financial management
Negative: high credit card balances demonstrate poor financial management (i.e., client needs more access to credit)
Negative examples: maxed out credit cards
indicators of good/bad credit: length of credit history
positive, negative, negative examples
Positive: longer credit history provides more info for lenders, which means lower risk
Negative: Shorter credit history provides little to no info for lenders, which means more risk
Negative examples: no credit history
indicators of good/bad credit: type of credit used
positive, negative, negative examples
Positive: different types of credit show variety, which shows lenders that consumers can handle different types of credit
Negative: fewer types of credit show limited profile info to lenders, which means a higher risk
Negative examples: ONLY having a student loan, or ONLY having credit cards
indicators of good/bad credit: new credit
positive, negative, negative examples
Positive: credit applications can lead to new credit accounts or loans, which can establish history over time
Negative: too many inquiries or new credit accounts in a short period of time will raise questions for lenders
Negative examples: new inquiry each month or several new lines of credit within a few months
credit score
a numerical interpretation of a consumer’s creditworthiness based on info in his/her credit report
percentage breakdowns of credit score factors
- account history = 35%
- accounts owed = 30%
- length of credit history = 15%
- new credit = 10%
- types of credit used = 10%
Fair Credit Reporting Act (FCRA)
- you have the right to know what’s in your file
- you have the right to dispute incomplete or inaccurate info
- access to your file is limited
- you may seek damages from violators
- additional state rights may be available
Fair & Accurate Credit Transactions Act (FACTA)
- you have the right to a free annual credit report
- you have the right to place a fraud alert on your credit file (lasts 90 days, all access to credit info must be approved by consumer)
- credit card numbers must be truncated so the full number is not visible on reports
Fair Credit Billing Act (FCBA)
1) you can dispute billing errors associated with your credit card account
- must be sent via mail within 60 days of date of credit card statement showing error
- creditor has 30 days to acknowledge letter and 90 days to research the dispute and make a determination
2) you must be billed in a timely manner
- creditors must send billing statements to consumers at least 14 days before the payment is due
4 steps of asset building
1) choose the right bank or credit union account
2) build savings for emergencies and large purchases
3) invest for retirement
4) take advantage of tax credits
Earned Income Tax Credit
low- to moderate-income individuals and families with earned income may be eligible for this tax credit. Earned income includes wages, salary, tips, and other employee pay. it also includes net earnings from self-employment.
Amount is based on income, marital status, and number of children.
Educational tax credit
clients who are in a post-secondary educational program, or who are supporting children in a post-secondary program, may qualify for an educational credit.
Child & Dependent Care Tax Credits
Those who are working, or are actively looking for work, may be eligible for this credit if they are paying a service to take care of a dependent (child or adult).
Also, a client may claim additional tax credits for any qualifying child under the age of 17.
Teaser Rates
an initial temporary interest rate on an adjustable-rate mortgage that results in lower mortgage payments
to attract borrowers, the rate is typically lower than the market rate, but only remains in effect for a short period of time before increasing, which in turn increases mortgage payments
can be a sign of predatory lending
6 common predatory lending practices
1) limited-time offers
2) high-risk loans
3) higher loan amounts
4) high fees or costs
5) false or hidden disclosures
6) loan flipping
limited-time offers
loan officers require you to act immediately, with statements such as “If you don’t decide today, you will lose this great opportunity!” or “This is your only chance to get this loan!”
