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72 Cards in this Set
- Front
- Back
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Three Types of Credit |
Noninstallment (Furniture) Installment (Car Loan) Revolving Open-End Credit (Credit Card) |
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Credit Card Advantages |
Don't have to carry cash/check Flexibility for emergencies Build credit score Consolidated monthly list of purchases |
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Credit Card Disadvantages |
Risk of Excessive Spending Accumulation of Debt Might buy things you can't afford |
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Equal Credit Opportunity Act |
Prohibits denial of credit based on gender, age, race, national origin, religion, or marital status |
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Credit Insurance |
Insurance that protects you from an inability to make monthly payments. Covers your monthly payments if you suddenly become unable to make them. |
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Three Major Credit Reporting Bureaus |
Equifax Experian TransUnion |
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What's on your credit report? |
Report ID Information Personal Information Public Record Information Collection Agency Account Information Credit Account Information Inquiries |
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How can you correct a mistake on your credit report? |
Send them a letter and ask them to correct it. Show evidence, and they have 30 days to address your concerns |
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What does FICO stand for? |
Fair Isaac Corporation |
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Min-max and low-high FICO scores |
300-850 550-700 |
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Do FICO scores from different bureaus always match? |
No. Different bureaus may have different information about you |
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How can you improve your credit score |
Catch up on late payments Make at least the minimum payments on time Reduce your total debt (restructure if possible) |
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Define Identity Theft |
Someone uses your personal information for their own gain |
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Identity theft tactics |
Shoulder surfing Dumpster diving Skimming Pretexting Phishing Pharming |
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How to protect yourself against identity theft |
Protect your information (both at home and at work) |
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Steps in responding to identity theft |
Contact Police Contact FTC Contact Credit Reporting Companies Contact Creditors Contact anybody else who might be involved/affected |
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Information collected when you apply for a credit card |
Personal cash flows statement Personal balance sheet Credit history Capital Collateral |
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Types of credit cards |
Retail/proprietary cards Secured cards Prepaid cards |
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Things to consider when comparing credit cards |
Credit limit Overdraft protection Annual fee Incentives Grace period Interest rate Cash advances |
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Who establishes the credit limit |
The creditor |
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What is the value of overlimit protection |
The world doesn't end if you put too many purchases on your credit card |
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Do all cards charge an annual fee? |
No
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What is a grace period |
Time after purchase before interest is charged |
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Three types of credit card interest |
Fixed rate
Variable rate Tiered rate |
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Three interest calculation methods |
Average daily balance Previous balance method Adjusted balance method |
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Be able to calculate simple interest |
Interest = Principal * Rate * Time |
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What is the CARD act? |
Credit Card Accountability, Responsibility, and Disclosure Act |
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What does the CARD act do? |
Places limits on fees Requires advance notice of interest rate changes Rules for promotional interest rates Rules for payment periods Rules for credit limit adjustments Disclosure regarding payment of balance due Restrictions for cardholders younger than 21 |
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How to use credit cards wisely |
Make regular payments Don't buy anything you can't afford Lower your limit to reflect economic conditions Pay credit card bills before investing Prioritize credit card debt Avoid credit repair services |
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Why should you pay off credit card debt before other debts
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Because credit cards usually have the highest interest rates
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Are credit repair services a good idea |
Not really. You can do everything they're going to do yourself for no charge |
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Two types of personal bankruptcy |
Chapter 13 (Basically a forced restructuring of debt) Chapter 7 (Debt disappears, but so do all your assets) |
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Sources of personal loans |
Financial institutions Friends and family P2P lending |
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Steps in the personal loan process |
Apply (personal balance sheet and personal cash flows statement) Loan contract (amount of loan, interest rate, repayments schedule, maturity, collateral) |
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What is included on the loan contract |
Amount of loan Interest rate Repayment schedule Maturity Collateral |
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What do amortization and maturity mean |
Amortization = pay down a loan through equal payments over time
Maturity = life of the loan |
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Secured vs unsecured loan |
Secured = backed by collateral Unsecured = not |
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What are cosigners? |
responsible for your debts if you can't pay |
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Things to consider before cosigning |
What is the likelihood that I'll get stuck with this debt? How can I protect myself in the event of the above? If I do end up liable, can I cover it? |
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What is APR |
Annual Percentage Rate Your interest rate extrapolated out to a year |
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Add-On Interest Method |
(Principal + Total Interest) / Months |
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Decisions you need to make when purchasing a car |
How much to spend What car you want How much are you willing to pay Financing strategy |
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No-debt vs limited-debt solutions |
No-debt = buy a car outright. Usually this means a cheap used car Limited-debt = Finance a little, but try to pay it off as quickly as possible |
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Seven factors when deciding on a car purchase |
Personal preference
Price Condition Insurance Resale Value Repair Expenses Financing Rate |
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Car price negotiation |
Over the phone in person (can be dangerous) trade-ins No-haggle dealer Purchase online |
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Advantages of leasing |
Lower down payment Return the car at the end of the lease period Relatively new vehicles |
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Disadvantages of leasing |
No equity investment Responsible for maintenance costs while driving it Charged for any damage incurred during lease period |
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Two types of student loans |
Subsidized (based on financial need) Unsubsidized (everyone is eligible) |
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Equity
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Market value minus debt owed |
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Home equity loan |
Loan held against home equity (also known as a second mortgage)
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Payday loans |
Loans taken out in advance of a paycheck Usually ends up in a cycle of taking out payday loans to cover payday loans Bad idea |
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Factors you should take into account when making a home buying decision |
How much you can afford What you want What you need |
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Common mistakes in the home purchasing decision |
That they can bypass a down payment by getting a larger mortgage That they can and will get a second job to cover the monthly payments That they will benefit from getting a more expensive house as costs will rise over time |
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Advantages of using a realtor |
They have experience They have insider knowledge of the market They can guide you through the process |
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Disadvantage of using a realtor |
They work on commission, and therefore have a personal stake in selling you the house
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What are some of the criteria used when selecting a home |
Price vs budget Location Maintenance School System Insurance Taxes Homeowner's Association Resale Value Personal Preferences |
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Market analysis |
Comparing homes in the surrounding area to make an educated guess at the value of your home |
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How does the economy affect home prices |
Strong economy --> Higher prices Weak economy --> Lower prices |
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What were some of the problems encountered in the recent financial crisis |
Everything sucked |
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What are zoning laws |
Areas can be zoned for either industrial use or residential use. Homes in industrial zones are often cheaper |
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Why is obtaining a second opinion on a home valuation a good idea |
Because you have a better chance of getting an accurate appraisal |
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How much of a down payment is expected on a home purchase |
10%-20% |
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What is private mortgage insurance |
Something that you will likely be forced to purchase if your down payment is less than 20% of the sale value.
PMI covers the creditor in the event that you default |
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Fees and closing costs |
Loan application fee Points Loan origination fee Appraisal fee Title search and insurance |
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What is an amortization table |
A schedule of monthly payments laid out until the maturity date of the loan
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Fixed rate vs adjustable rate mortgage |
Fixed rates don't change...because they're fixed ARMs can fluctuate after a specified period of time |
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What affects the rate on an ARM |
Depends on what the rate is tied to, but most are tied to the average cost of deposits of financial institutions |
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What is a cap on an ARM |
Max and min fluctuations in ARM interest rates |
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What things should be considered when renting vs purchasing a home |
Total cost of each path (opportunity cost of a down payment, property taxes, home insurance, closing costs, maintenance costs, utilities, tax savings) |
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Three types of special mortgages |
Graduated payment mortgage Balloon payment mortgage Interest-only mortgage |
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Advantages of refinancing |
May be able to get lower rates |
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Disadvantages of refinancing |
Will incur closing costs again |
