Presentation on theme: "The reputation one has built in his or her dependability in regard to paying back borrowed money."— Presentation transcript:
The reputation one has built in his or her dependability in regard to paying back borrowed money
1. Credit History: How faithful have you been at paying back borrowed money?
2. Character Criminal past? Anything in the persons history? 3. Capacity to pay What is the persons monthly income and can he or she handle a monthly payment schedule?
4. Capital How much does the person have in the bank?
Entitled to one free credit report a year Three main credit bureaus: Trans Union Equifax Experian
Range from borderline sub-prime (high risk)
35% punctuality of payments in the past 30% capacity used (maxed out?) 15% length of credit history 10% type of credit used (installment, revolving) 10% recent applications for credit/recent credit obtained
Convenient Easy to get, Easy to use Risks are high Theft and fraud
How should a consumer select the best credit card for his or her financial situation?
Late fees Interest rates Other card offers start to come Statements have due dates close so it is difficult to pay on time
Read Deter, Detect, Defend, Avoid ID Theft and Red Flag Rules Answer questions: 1-4 from Deter, 5-9 from Red Flag 1. What are the ways in which credit card account information is fraudulently obtained? 2. What risks do creditors take when issuing unsecured credit cards?
3. What incentive exists to compensate creditors for taking the risk of extending credit? 4. What would happen if government imposed limits to the amount of interest these providers could charge? 5. What are the Red Flag Rules?
6. Whom do the Red Flag Rules apply to? 7. Who opposes the Red Flag Rules? Why? 8. What are the benefits of the Red Flag Rules? 9. What are the costs of the Red Flag Rules?