Chapter 15 Credit

Factors to Consider Before Using Credit Chapter 15 Consumer Credit What should you know before using credit? Do you have the cash you need for the down payment? Do you want to use your savings instead of credit? Can you afford the item? Could you use the credit in some better way? Could you put off buying the item for a while? What are the opportunity costs of postponing the purchase? What are the costs of using credit?

Factors to Consider Before Using Credit Chapter 15 Consumer Credit Advantages of Credit You enjoy goods and services now instead of later Combining several purchases while making one monthly payment A credit card is needed for transactions such as renting a car Traveling with a credit card is safer than cash Good credit results in other lenders viewing you as a responsible person Disadvantages of Credit Credit costs money Failure to pay your bills can ruin a good credit reputation Failure to pay your bills can can lead to a loss of income and property Using credit does not increase your total purchasing power

Sources of Consumer Credit Chapter 15 Consumer Credit LoansCredit Cards Inexpensive Loans Medium-Priced Loans Expensive- Loans Home Equity Loans Debit Cards Cobranding Smart Cards Store-Value Cards Travel and Entertainment (T&E) Cards

Can You Afford a Loan? Chapter 15 Consumer Credit Add up all your basic monthly expenses and then subtract the total from your take-home pay. Consider what you might give up to make a monthly loan payment.

The Cost of Credit Section 2 Chapter 15 Consumer Credit Annual Percentage Rate Table for Monthly Payments

Daily Balance Method To determine the daily periodic rate on a yearly APR of 18%: 18% ÷ 365 days =.05% To calculate the finance charge using a daily periodic rate, multiply: Average Daily Balance x Daily Periodic Rate x Days in the Cycle = Monthly Finance Charge (For this example, $100 is the account balance) $100 x.03288% x 31 = $1.02

Applying for Credit Chapter 15 Consumer Credit The Five Cs of Credit CharacterCapacity CapitalCollateral Conditions

Applying for Credit Chapter 15 Consumer Credit Two Types of Credit Reports FICOVantagescore

Applying for Credit Chapter 15 Consumer Credit Personal Credit Score

Applying for Credit Section 2 Chapter 15 Consumer Credit Because of the Equal Credit Opportunity Act (ECOA), a Creditor May Not: Turn you down or decrease your credit because of your age Ignore your retirement income in rating your application Close your credit account because you have reached a certain age Close your credit account because you have retired Deny you credit because you receive public assistance You have a right to know why you are refused credit.

Your Credit Report Chapter 15 Consumer Credit The Three Major Credit Bureaus Experian Trans Union Equifax Where Do Credit Bureaus Get Information? Banks Finance Companies Stores Credit Card Companies Other Lenders

Your Credit Report Chapter 15 Consumer Credit Contents of Your Credit File Employer, Position, Income Previous Address Previous Employer Spouse’s Information Homeowner or Renter Status Checks Returned or Insufficient Funds

Your Credit Report Section 2 Chapter 15 Consumer Credit You and Your Credit File There are time limits on unfavorable data. Credit bureaus must ensure information in your credit file is correct. You can sue a credit bureau or creditor that has caused you harm by not following rules established by the Fair Credit Reporting Act.

Your Credit Report Section 2 Chapter 15 Consumer Credit

Billing Errors and Disputes Chapter 15 Consumer Credit If you write a letter to a creditor to dispute a charge: The creditor must acknowledge your letter within 30 days. If the creditor made a mistake, you do not have to pay any finance charges on the disputed amount. If no mistake is found, the creditor must promptly send you a letter of explanation.

Billing Errors and Disputes Chapter 15 Consumer Credit For your protection: A creditor may not threaten your credit rating. A creditor cannot take any action against you until a complaint is settled. You may instruct a credit card company to hold payment if you purchase a defective item.

Credit and Stolen Identity Chapter 15 Consumer Credit If you think you are a victim of identity theft: Contact the Credit Bureaus Contact the Creditors File a Police Report

Protecting Your Credit From Theft or Loss Chapter 15 Consumer Credit Avoid Having Your Credit Card Being Stolen or Lost Always retrieve your card after a purchase. Keep a record of your credit card numbers. Notify the credit card company immediately if your card is lost or stolen.

Protecting Your Credit from Theft or Loss Chapter 15 Consumer Credit Protecting Your Credit on the Internet Use a secure browser. Keep records of online transactions. Review monthly bank and credit card statements. Read privacy and security policies of Web sites. Keep your personal information private. Never give your password to anyone online. Do not download files sent to you by strangers.

Complaining About Consumer Credit Chapter 15 Consumer Credit Consumer Protection Laws Credit Card Act Truth in Lending Act Consumer Leasing Act Equal Opportunity Act (ECOA) Fair Credit Opportunity Act Fair Credit Reporting Act Consumer Credit Reporting Reform Act

Signs of Debt Problems Chapter 15 Consumer Credit Are You Experiencing Two or More of These Warning Signs? You make only the minimum monthly payment You struggle to make the monthly payment The total balance increases every month You miss payments or you are often late You use savings to pay for necessities You receive second or third late payment due notices You borrow money to pay off old debts You exceed credit limits You have been denied credit because of bad credit

Debt Collection Practices Chapter 15 Consumer Credit Creditors often turn over bad debts to debt collection companies. The Federal Trade Commission enforces the Fair Debt Collection Practices Act (FDCPA).