Fundamentals of Credit

Lesson 6 Fundamentals of Credit

Module 4

Objectives

• Discuss how credit works.

• Identify positives and negatives of buying on credit.

Essential Question

• Discuss the purpose of financial institutions

Fundamentals of Credit

Lesson 6 : Warmup

Multiple Choice

Credit card companies send pre-approved offers in the mail only to those people who have good credit scores.

• True

• False

Multiple Choice

All credit cards charge the same annual fees and interest rates.

• true

• false

Multiple Choice

How are a credit score and credit report related?

• A credit report is determined by the factors in your score

• A credit score is determined by the factors in your report

• Credit reports are less important than your credit score

• They're not related at all

Multiple Choice

Which of the following is TRUE about finding errors on your credit report?

• You may have to file a dispute with each credit bureau

• You should wait until the end of the month before reporting

• Finding errors is common & is not a big deal

• Overlooked errors may result in you paying a fine

Multiple Select

All of the following are benefits of having a good credit score EXCEPT...(hint: choose 2 correct answers)

• You can get a higher return on your Retirement fund

• Higher interest rate on credit cards and loans

• Easier approval for rental apartments and houses

• Better car insurance rates Better car insurance rates

Multiple Choice

T/F: A negative credit event (bankruptcy) can have a WORSE impact on a higher credit score.

• True

• False

Multiple Choice

Which of the following is TRUE about a credit report?

• It is a complete history of one type of credit you have

• Credit reports are maintained by the 5 main credit bureaus

• You can get a copy of your credit report for free

• You can get a credit report only when you're 21 years old

Multiple Choice

Which of the following does NOT contribute to your credit score?

• Your payment history

• Which banks issued your credit cards

• Your debt-to-credit ratio

• Length of credit history

Lesson 6 :Fundamentals of Credit

Vocabulary

Fair Credit reporting Act of 1971

If you are denied credit, insurance or employment because of an unfavorable credit report, you have the right to request a copy of your credit report for free.

Capital

One of the 3 Cs of Credit; What you own

Asset

Something you own

Fair Debt Collection Practices Act of 1977

Forbids abusive practices by debt collectors

Capacity

One of the 3 Cs of Credit; Ability to earn enough income to repay a loan when it is due

Fair Credit Billing Act of 1975

Guarantees the right of consumers to settle disputes with retail stores and credit card companies before information is distributed to credit reporting agencies

Consumer Credit Reporting Reform Act

Made it easier for consumers to correct mistakes in their credit report.

Buying on credit

Borrow money to by a good or service

Character

One of the 3 Cs of Credit; Sense of responsibility

Liability

Something you owe

Truth in Lending Act of 1969

Requires that all contracts for credit clearly state the finance charge uniformly

Equity

The difference between what an asset is worth and what you owe

Equal Credit Opportunity Act of 1975

Banned discrimination in determining creditworthiness because of gender, martial status, or age

Lesson 6 Fundamentas of Credit

Video Lesson

Lesson 6 Fundamentals of Credit

Quiz 6

Multiple Choice

If the value of your home is $200,000 and you have an outstanding mortgage balance of $120,000, what is the amount of equity you have in the home?

• $80,000

• $120,000

• $200,000

• $320,000

Multiple Choice

Debt collectors can suggest you will be arrested if you don't pay them.

• True

• False

Multiple Select

In order to determine your character lenders might look at which of the following? (Check all that apply)

• Record of paying your debts on time

• How much you earn

• What you currently own

• How long you have lived at the same address

• Length of employment

Multiple Choice

If you are creditworthy, you are a good risk for creditors.

• True

• False

Lesson 6 Fundamentals of Credit

THE END !