2Using Credit Vocabulary CreditorRevolving charge accountCharge accountInstallment accountVehicle leasingCash loanCollateralCosignerHome equity loanEquityCredit ratingCredit bureauCredit agreementFinance chargesInterestAnnual percentage rate (APR)Grace periodBankruptcyWhat are the terms I need to know for this chapter?
3Using CreditCredit 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?
4Allows the use of goods, such as a car or house Advantages of CreditAllows the use of goods, such as a car or houseAllows you to buy expensive itemsCan offer a source of cashOffers convenience, you don’t need to carry cash.Provides a record of purchases.What are the advantages of using credit?
5Disadvantages of Credit Using credit reduces future income, use credit now spend tomorrow’s incomeUsing credit can be expensiveCan encourage impulse buyingMisusing credit can cause serious problemsWhat are the disadvantages of credit?
6Credit card accounts Charge accounts Installment accounts Using CreditCredit card accountsCharge accountsInstallment accountsVehicle leasingCash loansHome equity loansWhat are the different types of credit available to me?
7Banks and credit card agencies also issue credit cards. Using CreditMany 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?
8Using CreditSome businesses allow customers to charge goods and services on a file at the businessIt 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?
9Using CreditIs 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?
10This is when you need to borrow money to buy items you need or want. Using CreditThis 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?
11Using CreditThis 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?
12You will need to apply for credit by filling out a credit application Using CreditYou 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 applicationThis 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?
13Using CreditCreditors 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 utilitiesHow is a person considered a good credit risk?
14Owning a car, home, stocks, or bonds Using CreditOwning a car, home, stocks, or bondsLiving in the same community for a period of time.How is a person considered a good credit risk?
15Get a job and stay employed Open a checking account Using CreditGet a job and stay employedOpen a checking accountOpen a savings accountBuy an item on a layaway plan.Apply to a gasoline company or a local store for a credit cardHow can a person build their credit rating?
16Using CreditOnce 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?
17Generally, negative information stays on your record for 7 years Using CreditInformation on your credit record shows only the facts collected by the credit bureau.Generally, negative information stays on your record for 7 yearsWhat’s in a credit record?
18Before you sign any type of credit agreement, examine it carefully. Using CreditBefore 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?
19Using CreditKnowing 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?
20Length of the repayment period Using creditWhen you apply for credit, the following factors determine the amount of finance charge you may pay:Amount of credit usedInterest rateLength of the repayment periodWhat is the cost of credit?
21Interest is the price paid for the use of money over a period of time Using CreditInterest is the price paid for the use of money over a period of timeAnnual percentage rate (APR) is the actual rate of interest charged on a yearly basisGrace period is the number of days allowed to pay for a new purchase before interest is charged.What is interest rate?
22Equifax Experien Transunion Using Credit What are the three credit agencies?