Download - Chapters 17 & 18
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Chapters 17 & 18Chapters 17 & 18
Credit Records and Laws&
Responsibilities and Costs of Credit
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Credit RecordsCredit Records
• Credit history –
• Credit bureau –
• 3 largest credit bureaus– – –
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Credit RecordsCredit Records• Credit report –
• Subscribers –
– – – –
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Public InfoPublic Info
• ________ ________are searched for information to add to your credit file:– – – – – – –
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CreditworthinessCreditworthiness
• 5 C’s of Credit– _________– responsible attitude toward living
up to agreements; also stability– __________– financial ability to repay a loan– __________– net worth should be sufficient to
repay debt– __________ – general economic conditions;
job security– __________
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Personal Info (asked on a credit app.)Personal Info (asked on a credit app.)
– name– age – income– number of
dependents– residence– obligation to pay
child support
– accounts in your name
– list of assets– employment history– rent or own– residence history– outstanding debt
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Building CreditBuilding Credit
1) Begin with a ______________2) Open a _______________3) Open a __________________4) Apply for a ________________5) Get a __________
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Credit RatingsCredit Ratings
• Credit rating –
• Point system – (FICO score) assigns points based on amount of current debt, no. of late payments, no. of open accounts, employment, income, etc. (300-850)
• Rating system – excellent, good, fair, poor
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Rating SystemRating System
• Excellent - (A-rating)
• Good – (B-rating)
• Fair –
• Poor
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Sections of a Credit ReportSections of a Credit Report
• • • • • •
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Credit LawsCredit Laws
• Consumer Credit Protection Act – (Truth- in- Lending Act) -
– Limits liability to $50 for stolen cards• Fair Credit Reporting Act –
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Credit LawsCredit Laws
• Fair Credit Billing Act –
– If you find an error, send a letter within 60 days– Creditors must acknowledge the error within 30 days
and resolve it within 90 days
• Equal Credit Opportunity Act -
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Credit LawsCredit Laws
• Fair Debt Collection Practices Act – eliminates abusive collection practices by debt collectors; restricts the time and frequency of collections; collectors cannot use threats, obscenities, false and misleading info, or intimidation.– Debt collector –
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Responsibilities of Consumer CreditResponsibilities of Consumer Credit
• Responsibilities to ____________– Use credit wisely– Check out businesses– Comparison shop
• Responsibilities to ___________– Limit your spending to what you can repay– Read and understand the terms of your credit
• _________ Responsibility to _____– Assist consumer in making wise purchases– Inform customers about rules, fees, etc.– Cooperate with reporting agencies– Have sound lending practices and fair collection
methods
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Protecting Yourself From FraudProtecting Yourself From Fraud
• Safeguard Your Cards– – – – – –
–
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Protect your cards OnlineProtect your cards Online
• Deal only with companies online that you know and trust
• Look for the browser symbol that indicates a secured site
• Merchants should state privacy policies• Look for watchdog group seals (Better
Business Bureau, TRUSTe)
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Avoid Unnecessary Credit CostsAvoid Unnecessary Credit Costs• Accept only the amount you need
– Unused credit – • Do not increase spending when income increases• Keep number of cards to a minimum• Pay cash for purchases under $25• Understand the cost of credit• Shop for loans• Time your credit purchases carefully• Take full advantage of rebate programs –
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Credit VocabCredit Vocab
• Fixed-rate loans –
• Prime rate –
• Simple interest –
• Principal –
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Credit Card Billing StatementsCredit Card Billing Statements
• Adjusted Balance Method –
• Previous Balance Method –
• Average Daily Balance Method –