Fin Lit Credit Test Study Guide

Credit

The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

Creditor

A person or business that loans money to others, charging interest and fees.

Debt

Money borrowed.

Debtor

A person who borrows money from others and must be qualified to receive credit.

Interest

A sum paid or charged for the use of money or for borrowing money.

Principal

The amount of money borrowed.

Term

The length of time you have to pay off a loan.

Variable interest rate

An interest rate on a loan or security that fluctuates over time based on an underlying benchmark.

Fixed interest rate

An interest rate that stays the same for the duration of your loan.

Installment credit

A credit arrangement where the borrower must repay the amount owed plus interest in equal payments.

Revolving credit

Credit that is automatically renewed as debts are paid off.

Payday Loans

A short term, high-cost loan, typically due on your next payday.

Installment Loans

A type of loan where you borrow a sum and repay it in fixed installments.

APR (annual percentage rate)

A uniform measurement of the total cost of a loan, expressed as a yearly percentage.

Grace Period

A time period during which no finance charges will be added.

Billing Cycle

A schedule of recurrent times for sending bills, typically 25-30 days.

Minimum Payment

The smallest required payment that maintains good standing with the lender.

Due dates

The dates when payments are due.

Fees

Amounts required to be paid, often incurring consequences if paid late.

Debit card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder.

Home Mortgage

Spreading the cost of property over many years.

Car Loan

A loan to finance the purchase of a vehicle.

Secured Credit Card

A credit card backed by a savings account to serve as collateral.

Credit History

A summary of a person's borrowing and repayment history.

Credit Score

A number indicating to lenders a person's capacity to repay a loan.

Character (5 C's of Credit)

The distinctive qualities that describe how a person thinks, feels, and behaves.

Capacity (5 C's of Credit)

A consistent work record providing enough income to support credit.

Capital (5 C's of Credit)

Assets such as checking and savings accounts showing financial means.

Collateral (5 C's of Credit)

A security pledged for the repayment of a loan.

Conditions (5 C's of Credit)

External factors affecting the ability to repay a loan.

Consumer Protection Act

Requires lenders to inform consumers about all costs of a credit purchase.

Fair Credit Reporting Act

Protects privacy of information and ensures accuracy in credit reports.

Chapter 7 Bankruptcy

Liquidation bankruptcy forfeiting assets for discharge of debts.

Chapter 13 Bankruptcy

Reorganization bankruptcy allowing individuals to repay debts while keeping property.

ID Theft

Stealing someone's identity by obtaining personal information.

Phishing scam

A scam to trick individuals into providing sensitive information via fake emails.

Skimming

Illegally obtaining credit card data through covert means.

Voluntary bankruptcy

Legal procedures initiated by a debtor to declare bankruptcy.

Discharge (debt)

Release from debt obligations.

Public record

Information such as bankruptcy filings and marital status that is accessible to the public.