1. Credit application and documents
Chapter 18-3
Credit application and documents

2. GOALS Explain the credit application process.
Describe the activates of a credit bureau.
Discuss commonly used credit documents.

3. CREDIT APPLICATION PROCESS
To obtain a loan or credit card, you must prove that you are a good credit risk.
Lenders need certain information in order to make a decision about granting credit.
They will be asked two things: your ability to repay a debt and your willingness to do so.

4. The Three Cs of Credit
In deciding whether to grant you credit, businesses consider three main factors known as the three Cs – characters , capacity and capital.

5. Characters
Refers to your honesty and willingness to pay a debt when it is due.
If you have a history of paying bills on time, creditors believe that you are a good credit risk.

6. Capacity Refers to a person’s ability to pay a debt when it is due.
The lender or seller must decide if you have enough income to pay your bills.
If your income is too small or unsteady, granting your credit may not be wise.

7. Capital Capital is the value of the borrower’s possessions.
It includes the money and property you own.
your capital may include a car is paid for and a house on which a large amount has been paid.

8. Credit Applications
When you apply for credit or a loan, the lender will ask you to fill out an application.
A credit application is a form on which you provide information needed by a lender to make a decision about granting credit.
One of the most important parts of a credit application is your credit references – businesses or individuals who are able and willing to provide information about your creditworthiness. Your signature on the application gives a references to inquire about your credit record.

9. CONT
Your signature also indicates that you understand the type of credit and that information you have provided is true.
You need to fill out the credit application completely , accurately , and honestly.

10. Documenting Credit Data
Information provided on credit applications must be verified to assure its accuracy,
Banks and other financial institutions can report whatever the applicants have the accounts they listed.
You may list a reference because you do not have sufficient business credit references.
The person that you listed can indicate how he or she feels you conduct your personal business activities.

11. Actions to Establish Credit.
Building a good record of creditworthiness can be important.
You can start when your in school by having good grades and attendance.
Both employers and lender know that school behavior patterns tends to carry on a later in life.
Some people establish credit records by charging small purchases.
Like buying something or making payments using a credit card.

12. CON’T
Having a good part time or full time employment record also helps to start a favorable credit record.
Other information that lenders will want to know relates to your finance.
You will need to report how much you earn, what kinds of savings and investments you have , and whether you have any other sources of income.

13. Credit bureau
In addition to checking with your credit references, a lender will usually check with a credit bureau.
A credit bureau, or credit reporting agency, is a company that gathers information on credit users.
Credit bureaus keep debt records of consumers.
They can record only information that is officially reported to them

14. CREDIT REPORT
A credit bureau uses your record to grade you as a credit risk.
Your credit reports shows the debts you owe, how often you use credit, and whenever you pay your debts on time.
Your credit record is confidential.
That is only you and those who have a legitimating reason for examining it can obtain it.
The top half contains background information about the individual. The bottom half lists information about the individual’s accounts and payments history.

15. CREDIT DOCUMENTS Credit is important in many ways.
Million of consumers and businesses enjoy this privilege.
No matter what kind of credit is involved, both parties have legal responsibilities.
You can help maintain a good credit record by keeping track of your purchases and payments.

16. Credit contracts
“KWAYS” are four letters to keep in mind when signing any legal form
These letters stand for “keep what you signing”
This principle applies to all credit contracts.
And installment on most important forms you sign. But before singing one consider the following
How much are the finance charges? Are they clearly shown on the contract?
Does the contract include the cost of services you may need, such as repairs services you may need such as repairs to a television or a washing machine?
Does the contract have an add-on feature so that you can later buy other items
if you pay the contract in full before the ending date, will the finance charge be reduced?
Is the contract completely filled in before you sign? Be sure to draw a line through any blanks spaces before signing
Will you be given a copy of the contract?
Under wht conditions can the seller repossess the merchandise if you do not pay on time

17. Statement of account
The statement of accounting, or simply the statement I a record of the transaction completed burring the billing period.
The balance that was due when the last statement was mailed
The amounts charged during the month
The amounts for payment for returned items
The current balance + finance charges + purchases- payments
The minimum amount and when it is due

18. Accuracy of records
Keeping accurate records will help you avoid credit record problems.

19. Avoiding fraud
The federal trade commission reports the credit card fraud is a major problem
Each month you should check the accuracy of your statement by comparing it with your copies of sales slips.