Credit Lecture Worksheet PDF

Mr. Billingslea **Credit** 1. All major companies and organizations do background checks on prospective applicants. These checks include **criminal, drug screens, education, and credit**. 2. What is a credit score? A credit score is a numerical expression determined by an **algorithm...

Mr. Billingslea **Credit** 1. All major companies and organizations do background checks on prospective applicants. These checks include **criminal, drug screens, education, and credit**. 2. What is a credit score? A credit score is a numerical expression determined by an **algorithm** designed to analyze a person's **creditworthiness**. This algorithm is established by **credit reporting agencies**. Lenders use credit scores to determine who qualifies for a loan, at what **interest rate**, and what **credit limits**. 3. Credit scores range from **300 to 850**. 4. Approximately 2 out of every 10 Americans are passed over for a job because of their credit report. 5. The 4 major credit reporting agencies are: **Equifax** **Transunion** **Experian** **Credit Karma** 6. What is **capital**? Capital is **currency**. Currency is a society's or culture's means of **trade**. In other words, currency is **money**. In the United States the currency is the dollar. 7. The 3 C's of credit are: **Character, Capacity, and Capital**. 8. What is **capacity**? Capacity is an individual's ability to repay a debt. Name 2 examples of an individual's capacity to repay a debt. 9. What is **character**? Character is defined as the **moral** qualities of an individual. With respect to credit, a person's credit score serves as their character in the eyes of creditors. 10. What is **collateral**? Collateral is something pledged as **security** (a guarantee) for repayment of a loan; collateral will be **forfeited** in the event of a default. Name 3 examples of collateral. 11. Why do banks issue **credit cards**? Simply to make money. How do banks make money through the issuance of credit cards? 12. Define **interest** with respect to lending. Is the cost of borrowing money. 13. **Advantages to having credit are purchasing power, rewards, and convenience.** 14. **Disadvantage to having credit are paying more for purchases, spontaneous buying, and over-extension.** 15. Name something that you can do to build your **credit history**. 16. An **installment loan** is multiple scheduled equal payments on **closed end loans** (usually monthly). **Mortgages** and **auto loans** are examples of installment loans. These are called close end loans because there is a **fixed** date at which the payments will end. 17. A **revolving** loan is a loan that also has multiple scheduled payments (usually monthly), however, the payment amount usually varies, based on usage or payments made from payment to payment. This type of loan is called **open-ended** because there is no set date for payoff. An example of this type of loan is a credit card. 18. **Non-installment credit** refer to a system of credit that is payable in one **lump-sum** amount by a specified date. Non installment credit is the simplest form of credit. It can be **secured** or **unsecured**. An American Express credit card is a good example of a non-installment loan. So are invoiced purchases. 19. **Which account is closed end? a) revolving b) installment** 20. **Which account is open end? a) non-installment b) revolving** 21. **A credit card is what type of account?** **The 5 Factors That Determine Credit Scores** 5 Credit Score Factors