Chapters 17 & 18 Credit Records and Laws & Responsibilities and Costs of Credit

Credit Records Credit history – Credit bureau – 3 largest credit bureaus – – –

Credit Records Credit report – Subscribers – – – – –

Public Info ________ ________are searched for information to add to your credit file: – – – – – – –

Creditworthiness 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 –__________

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

Building Credit 1) Begin with a ______________ 2) Open a _______________ 3) Open a __________________ 4) Apply for a ________________ 5) Get a __________

Credit 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. ( )Point system Rating system – excellent, good, fair, poor

Rating System Excellent - (A-rating) Good – (B-rating) Fair – Poor

Sections of a Credit Report

Credit Laws Consumer Credit Protection Act – (Truth- in- Lending Act) - –Limits liability to $50 for stolen cards Fair Credit Reporting Act –

Credit 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 -

Credit 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 –

Responsibilities 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

Protecting Yourself From Fraud Safeguard Your Cards – – – – – – –

Protect 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)

Avoid 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 –

Credit Vocab Fixed-rate loans – Prime rate – Simple interest – Principal –

Credit Card Billing Statements Adjusted Balance Method – Previous Balance Method – Average Daily Balance Method –