Goal 7.3 Debt and Credit Objective: Summarize the impact and risks of credit.

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Presentation transcript:

Goal 7.3 Debt and Credit Objective: Summarize the impact and risks of credit.

Your credit score is a snapshot of your credit profile at the specific moment your score is given. Your score is based on your credit report, which contains your entire credit history. This document includes the good and bad of your credit-related decisions, the latter of which stay on your credit report for seven years. Having a good credit score is important because the power of a good score is growing in significance; credit checks are now customary when trying to get an apartment or a new job.

A: A financial institution may ask for collateral if your credit history is new or not good. Collateral: Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default also called security.

How can debt affect your future? I: Mortgage: mortgage: A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan. If you get into debt, buying property(house, condo) may be more difficult. If you own property and get into debt it may be harder to make your monthly mortgage payments and thus lose your property to foreclosure. The legal process by which an owner's right to a property is terminated, usually due to default on payments. II: Defaulting on a car loan or loan for merchandise is called repossession of property.