ch 15 Consumer Credit

Personal Finance

annual percentage rate (APR)

cost of credit on a yearly basis, expressed as a percentage

bankruptcy

legal process in which some or all of the assets of a debtor are distributed among creditors because the debtor is unable to pay his or her debts

closed-end credit

credit as a one-time loan that is paid back over a specified period of time in payments of equal amounts

collateral

a form of security that helps guarantee that the creditor will be repaid

consumer credit

use of credit for personal needs

cosigning

agreeing to take responsibility for loan payments if the other person fails to make them

credit

an arrangement to receive cash, goods, or services now and pay for them in the future

credit bureau

credit reporting agency (CRA) is a company that collects information about where you live and work, how you pay your bills, whether or not you have been sued, arrested, or filed for bankruptcy.

creditor

an entity that lends money 

credit rating

a measure of a person’s ability and willingness to make credit payments on time

credit report

The individual records of consumer financial behavior kept by credit bureaus and provided to businesses when they want to evaluate potential borrowers.

FICO score

A specific credit score developed by Fair Isaac Corporation

finance charge

total dollar amount paid to use credit

grace period

time period during which no finance charges will be added to an account 

identity theft

the illegal use of someone else's personal information (such as a Social Security number) especially in order to obtain money or credit.

line of credit

maximum amount of money a creditor will allow a credit user to borrow

minimum monthly payment

smallest amount that one can pay and remain a borrower in good standing

net income

income received from take-home pay, allowance, gifts, and interests

open-end credit

credit as a loan with a certain limit on the amount of money that can be borrowed for a variety of goods and services

simple interest

interest computed only on the principal