Unit 4 Credit and Debt . What is Credit ? Someone lends you money 1. The original amount borrowed is called the ___ Principal . Common Types of Credit. 2. Which type of credit has the highest interest rates? Credit Card (Revolving Credit)
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14. A pattern of rising income and steady employment help determine your ____ to repay your loan.
"The very best rates go to people with scores above 770, but a score of 700 is considered good
1. 35% - payment history
2. 30% - “debt to credit limit ratio”:
Compared to …..
3. 15% - length of credit history
They will look at a Borrower’s :
4. 10% - # of recently opened accounts and credit inquiries - when you pay for a credit score or potential lenders look into your score
5. 10% - mix of credit : higher scores if you can manage 2-3 cards and other loans at same time
These are not good ways to manage your credit
10% Pay Debt
20% Save Invest
70% Living Expenses
Previous Balance 1000
Paid the min - 50
New Balance ????? 950
But that 950 is charged interest. So…..
New Balance 960
Pay the min - 48
But add interest = 922
So you paid $98 on $1000 balance
Should owe $902 but owe $922
5. Make a Plan to Pay it Off
-bank sends contractors to take your possessions back (cars, boats, etc..)
d. Difficulty securing job …why?
-especially in business or finance
e. Hard to obtain future credit
Traditionally, the WSJ Prime Rate was determined by polling thirty (30) of America's largest banks. When twenty-three (23) of those 30 banks had changed their prime lending rate, The WSJ would respond by updating its published Prime Rate.
Providers of consumer and commercial loan products often use the U.S. Prime Rate as their base lending rate,
The U.S. Prime Rate is invariably tied to America's cardinal, benchmark interest rate: the Federal Funds Target Rate (also known as The Fed Funds Rate.)
The prime rate, as reported by the Wall Street Journal's bank survey, is among the most widely used benchmark in setting home equity lines of credit and credit card rates. It is in turn based on the fed funds rate, which is set by the Federal Reserve. The COFI (11th District cost of funds index) is a widely used benchmark for adjustable-rate mortgages.
Changes in the fed funds rate and the discount rate also dictate changes in the Wall Street Journal Prime Rate, which is of interest to borrowers.