Spending and Credit

Question 1

Equity

Answer 1

Ownership in something

Question 2

mortgage

Answer 2

type of loan people take to purchase a home

Question 3

credit

Answer 3

Money that a lender makes available to a borrower with the understanding that the borrower will repay the money

Question 4

credit bureau

Answer 4

Organization that collects credit information about individual consumers

Question 5

credit history

Answer 5

Record of credit use and payments.

Question 6

credit report

Answer 6

Summarizes an individual’s existing and past lines
of credit.

Question 7

credit score

Answer 7

score Created by credit bureaus to assess an individual’s
creditworthiness.

Question 8

credit card

Answer 8

Provides individuals with revolving open-end credit, which they can draw from repeatedly up to some pre-set limit. credit check Performed

Question 9

credit limit

Answer 9

A person may borrow up to this amount based on
his or her income level, debt level, and overall credit record.

Question 10

credit check

Answer 10

Performed by potential creditors to access a person’s credit report to examine the individual’s credit history and the ability to repay.

Question 11

credit provider

Answer 11

An entity, such as a bank, that agrees to make a
certain amount of credit available to a cardholder.

Question 12

principal

Answer 12

The total amount of money outstanding on a loan.

Question 13

ARM adjustable rate mortgage

Answer 13

Mortgage with a rate that may
go up or down. The rate change occurs at some preset time—
for example, after one year.

Question 14

FICO Fair Isac Corporation

Answer 14

Created a model on which credit scores are calculated

Question 15

Skimming

Answer 15

Identify theft technique that involves copying credit card numbers from cards

Question 16

Federal Staffor loan

Answer 16

The most common type of federal edu-cation loan; it is available in two forms: subsidized and
unsubsidized.

Question 17

Maturity rate

Answer 17

The date at which a loan will be completely repaid.

Question 18

security loan

Answer 18

Has an asset pledged against the loan. The lender is assured of ending up with some valuable asset if the borrower fails to pay off the loan.

Question 19

APR annual percentage rate

Answer 19

The interest rate that shows what a borrower is actually paying with all the costs of financing
factored in.

Question 20

Identity theft

Answer 20

When someone uses an individual’s personal
information without permission for personal gain.

Question 21

Fair credit reporting act

Answer 21

A federal law that limits the sharing of an individual’s financial information to firms that have a legal purpose to evaluate it.

Question 22

Interest

Answer 22

Fee charged by a lender on money borrowed.

Question 23

unsecured loan

Answer 23

A loan in which there is no collateral pledged.

Question 24

secured loan

Answer 24

Has an asset pledged against the loan. The lender
is assured of ending up with some valuable asset if the borrower fails to pay off the loan.

Question 25

teaser rate

Answer 25

An extremely low interest rate for a short period of time that is used to entice a borrower into a deal.

Question 26

lease

Answer 26

A long-term rental agreement.

Question 27

grace period

Answer 27

Time in which credit card companies do not charge interest on purchases. Typical grace periods are 20 days from the time the statement is “closed,” or the bill is calculated and sent.

Question 28

revolving open end credit

Answer 28

Allows consumers to borrow up to some preset maximum amount.

Question 29

payday lending

Answer 29

A lender provides cash advances at a high cost to customers who provide a check dated for some time in the future.

Question 30

credit bureau

Answer 30

Organization that collects credit information about individual consumers.

Question 31

Installment credit

Answer 31

Used for specific purchases; allows the borrower more time to repay.

Question 32

default

Answer 32

When a person stops making payments on a loan.

Question 33

libability coverage

Answer 33

Auto insurance that covers damage to an individual’s car or damage caused to other people or their property.

Question 34

cash advance

Answer 34

The ability to use a credit card to withdraw cash from a bank or ATM (rather than just purchasing a good or a service).

Question 35

subprime mortgage

Answer 35

High interest rate mortgage loan made to people with poor credit scores.

Question 36

pawnbroker

Answer 36

Holds items in exchange for loans that run for 30 days to as much as three months.

Question 37

pharming

Answer 37

Identity theft technique that uses e-mail viruses to redirect someone from a legitimate Web site to an official

Question 38

phising

Answer 38

Pretexting that occurs online.

Question 39

pretexting

Answer 39

Occurs when someone improperly accesses an individual’s personal information by posing as someone seeking data.

Question 40

debt consolidation

Answer 40

Combining several small accounts into one larger account that may be able to be financed at a lower rate.

Question 41

home equity loan

Answer 41

Allows a homeowner to borrow against the equity in his or her home—that is, the difference between the home’s value and the amount owed to a lender.

Question 42

personal loan

Answer 42

A loan that is not backed by collateral. Also known as an unsecured loan, it is based solely upon the bor- rower’s credit rating.

Question 43

equal credit opportunity

Answer 43

Prohibits creditors from denying credit based on gender, age, race, national origin, religion, ormarital status.

Question 44

fixed rate mortagage

Answer 44

A mortgage in which the interest rate remains the same for the life of the loan.

Question 45

non installment credit

Answer 45

The simplest form of consumer credit. It is usually for a very short term, such as 30 days.

Question 46

shoulder surfing

Answer 46

place accessing personal information by listening to a conversation or viewing personal information.

Question 47

federal Perkins loan

Answer 47

with “exceptional” financial need. This loan carries a lower interest rate and offers a longer grace period before repay- ment must begin.

Question 48

line of credit

Answer 48

An agreement to allow borrowing as needed up to a certain amount of money.

Question 49

policy rider

Answer 49

Additional insurance coverage to cover things such as jewelry or valuable heirlooms that are often not fully cov- ered by a typical insurance policy.