Chapters 17 & 18Chapters 17 & 18

Credit Records and Laws&

Responsibilities and Costs of Credit

Credit RecordsCredit Records

• Credit history –

• Credit bureau –

• 3 largest credit bureaus– – –

Credit RecordsCredit Records• Credit report –

• Subscribers –

– – – –

Public InfoPublic Info

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

CreditworthinessCreditworthiness

• 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.)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 CreditBuilding Credit

1) Begin with a ______________2) Open a _______________3) Open a __________________4) Apply for a ________________5) Get a __________

Credit RatingsCredit 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. (300-850)

• Rating system – excellent, good, fair, poor

Rating SystemRating System

• Excellent - (A-rating)

• Good – (B-rating)

• Fair –

• Poor

Sections of a Credit ReportSections of a Credit Report

• • • • • •

Credit LawsCredit Laws

• Consumer Credit Protection Act – (Truth- in- Lending Act) -

– Limits liability to $50 for stolen cards• Fair Credit Reporting Act –

Credit LawsCredit 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 LawsCredit 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 CreditResponsibilities 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 FraudProtecting Yourself From Fraud

• Safeguard Your Cards– – – – – –

–

Protect your cards OnlineProtect 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 CostsAvoid 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 VocabCredit Vocab

• Fixed-rate loans –

• Prime rate –

• Simple interest –

• Principal –

Credit Card Billing StatementsCredit Card Billing Statements

• Adjusted Balance Method –

• Previous Balance Method –

• Average Daily Balance Method –