1. Using Credit
Chapter 25, pgs

2. Using Credit Vocabulary
Creditor
Revolving charge account
Charge account
Installment account
Vehicle leasing
Cash loan
Collateral
Cosigner
Home equity loan
Equity
Credit rating
Credit bureau
Credit agreement
Finance charges
Interest
Annual percentage rate (APR)
Grace period
Bankruptcy
What are the terms I need to know for this chapter?

3. Using Credit
Credit is easily available to most consumers. Many businesses make it easy to “buy now and pay later” with credit.
A creditor may be a business or an individual who allows you to use credit for goods and/or service.
What is credit?
What is a creditor?

4. Allows the use of goods, such as a car or house
Advantages of Credit
Allows the use of goods, such as a car or house
Allows you to buy expensive items
Can offer a source of cash
Offers convenience, you don’t need to carry cash.
Provides a record of purchases.
What are the advantages of using credit?

5. Disadvantages of Credit
Using credit reduces future income, use credit now spend tomorrow’s income
Using credit can be expensive
Can encourage impulse buying
Misusing credit can cause serious problems
What are the disadvantages of credit?

6. Credit card accounts Charge accounts Installment accounts
Using Credit
Credit card accounts
Charge accounts
Installment accounts
Vehicle leasing
Cash loans
Home equity loans
What are the different types of credit available to me?

7. Banks and credit card agencies also issue credit cards.
Using Credit
Many department stores and companies issue credit cards so consumers can use credit to buy their goods and services.
Banks and credit card agencies also issue credit cards.
This allows customers the option to pay off their balance or spread it over a period of time.
What is a credit card account?
What is a revolving charge account?

8. Using Credit
Some businesses allow customers to charge goods and services on a file at the business
It is often used to charge expensive items like a major appliance or piece of furniture.
What is a charge account?
What is an installments account?

9. Using Credit
Is a credit transaction by which a person rents a car according to certain restrictions.
With a lease, you do not own the vehicle & will return after the lease term is up (2 to 4 years)
What is vehicle leasing?

10. This is when you need to borrow money to buy items you need or want.
Using Credit
This is when you need to borrow money to buy items you need or want.
To get cash loans, a borrower is required to pledge collateral.
Collateral is something of value held by the creditor in case you are unable to repay the loan.
What are cash loans?
What is collateral?

11. Using Credit
This type of loan provides automatic access to a sum of money separate from the amount the homeowner borrowed to purchase the house.
Is determined by subtracting how much is owed on a house from the amount the house is worth.
What is a home equity loan?
What is equity?

12. You will need to apply for credit by filling out a credit application
Using Credit
You may have a hard time starting credit for the 1st time because creditors need evidence that you can pay your bills.
You will need to apply for credit by filling out a credit application
This helps creditors evaluate your credit rating.
Credit rating – is a way a creditor’s rates how you pay your bills.
How can you establish credit?

13. Using Credit
Creditors consider people who have jobs w/ steady incomes as a good credit risks.
Must make regular, on-time payments on credit purchases, loans, or fixed expenses such as rent or utilities
How is a person considered a good credit risk?

14. Owning a car, home, stocks, or bonds
Using Credit
Owning a car, home, stocks, or bonds
Living in the same community for a period of time.
How is a person considered a good credit risk?

15. Get a job and stay employed Open a checking account
Using Credit
Get a job and stay employed
Open a checking account
Open a savings account
Buy an item on a layaway plan.
Apply to a gasoline company or a local store for a credit card
How can a person build their credit rating?

16. Using Credit
Once you use credit, you automatically establish a credit record at a local or national credit reporting agency also known as a credit bureau.
What’s in a credit record?

17. Generally, negative information stays on your record for 7 years
Using Credit
Information on your credit record shows only the facts collected by the credit bureau.
Generally, negative information stays on your record for 7 years
What’s in a credit record?

18. Before you sign any type of credit agreement, examine it carefully.
Using Credit
Before you sign any type of credit agreement, examine it carefully.
A credit agreement is a legally binding contract between a borrower and a creditor.
NEVER sign an agreement that has blank spaces.
What is a credit agreement all about?

19. Using Credit
Knowing the exact cost of credit can help you compare finance charges & find the best deal.
Finance charge are the total amount a borrower must pay for the use of credit.
What are finance charges about?

20. Length of the repayment period
Using credit
When you apply for credit, the following factors determine the amount of finance charge you may pay:
Amount of credit used
Interest rate
Length of the repayment period
What is the cost of credit?

21. Interest is the price paid for the use of money over a period of time
Using Credit
Interest is the price paid for the use of money over a period of time
Annual percentage rate (APR) is the actual rate of interest charged on a yearly basis
Grace period is the number of days allowed to pay for a new purchase before interest is charged.
What is interest rate?

22. Equifax Experien Transunion Using Credit
What are the three credit agencies?