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The All Powerful Credit Card and other types of credit. Lending Decisions. Credit Reports.

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credit reports
Credit Reports
  • Credit reporting company: an organization that compiles credit information on individuals and businesses and makes it available for a fee. (Three major credit reporting companies are Equifax, Experian and TransUnion.)
  • Credit report: a loan and bill payment history, kept by a credit reporting company and used by financial institutions and other potential creditors to determine the likelihood a future debt will be repaid.
  • Credit score: a number generated by a statistical model that objectively predicts the likelihood that a debt will be repaid on time.
the scores
The Scores
  • 720 and up: Excellent
    • Open up best interest rates and repayment terms
  • 680-719: Good
    • You can still get decent terms from lenders, although not as nice as those offered to borrowers with truly excellent credit scores. If you're shopping for a first home, a score in this range is certainly considered to be a good credit score.
  • 620-679: Average
    • absolute minimum credit score you can carry and still get fair mortgage terms. Smaller-ticket items that require financing are doable in this range
  • 580-619: Poor
    • loans on lenders' terms, be ready for higher interest rates, and expect finance charges that will hit you right in the wallet
  • 500-579: Bad
    • financing terms will cost you big-time, for long-term loans, such as a 30-year mortgage, expect to see interest rates that are at least three percent higher than interest rates awarded to borrowers with good credit
  • 500 and below: Miserable
    • any type of financing is almost impossible
freecreditreport com
FreeCreditReport.com
  • http://www.youtube.com/watch?v=YzkBhfbwRkg
applying for credit
Applying for Credit
  • When you’re ready to apply for credit, you should know what factors creditors think are important in deciding whether you’re creditworthy. You should also know what factors they cannot legally consider in their decisions.
  • What Law Applies?
    • The Equal Credit Opportunity Act requires that all credit applicants be considered on the basis of their actual qualifications for credit and not be rejected because of certain personal characteristics.
information a creditor cannot use
Information a Creditor cannot use…
  • Age limit???
    • Credit CARD act of 2009 states that if under the age of 21, parents must co-sign. To help college students from being targeted.
  • The Equal Credit Opportunity Act does not guarantee that you will get credit, but it does act against discrimination based on:
    • Age
    • Sex
    • Race
    • Martial Status
    • Color
    • Religion
    • National Origin
    • Receiving Public Income
    • Any action you have taken based on your right under federal credit law
take control of debt become a savvy borrower
Take Control of Debt: Become a Savvy Borrower
  • Types of Consumer Credit
  • Revolving credit—a line of credit that may be used repeatedly, with a prearranged borrowing limit; periodic finance charges are computed on the unpaid balance; minimum payment is usually a percentage of the balance due
  • Common types of revolving (open-end) credit include:

• Credit cards (bank or department store)

• Home equity lines of credit

• Check-overdraft accounts that allow a borrower to write checks over the actual balance in the bank

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Term credit—a loan for a predetermined amount that requires specified payments at regular intervals over the life of the loan; finance charges are agreed upon at the start of the loan

  • Common types of term (closed-end) credit include:

• Mortgage loans

• Student loans

• Vehicle loans

• Loans for other major purchases