Consumer Credit Explained

What is consumer credit? A\~ credit use for personal needs What is a grace period? the time between the end of a billing cycle and the due date for your payment. During this period, you can avoid interest charges on purchases if you pay your balance in full by the due date. You have within 20 to 25...

What is consumer credit? A\~ credit use for personal needs What is a grace period? the time between the end of a billing cycle and the due date for your payment. During this period, you can avoid interest charges on purchases if you pay your balance in full by the due date. You have within 20 to 25 days. What are some advantages of credit? Consumer credit allows people to enjoy things like cars, home, and vacation another advantage is Cash Back and fraud protection What are some disadvantages of credit? You can overspend and you have collateral. What is closed end credit? You pay back one time loans in a specified period. What are examples of closed end credit? Loans, Mortgage, and car loans What happens to consumers who do not pay off their credit card balances each month? Interest Which law requires all lenders to be upfront about their rates? Truth Lending Act. Which 2 ratios are often used to determine credit capacity? And what are their formulas? Debt payment to income ratio, **Total monthly debt payments divided by Gross monthly income. And Debt to equity ratio you have to divide your liabilities by your net worth.** **What are the six categories that comprise your credit report? Personal information, which may include your employer history** - **Consumer statements** - **Account information** - **Public records** - **Credit inquiries** - **Bankruptcy public records** **Jashas a balance of 4,000\$ on his credit card. If his total credit line is 21,000\$, what\'s his credit utilization? A, we divide his balance by his credit line.** **What is a credit bureau? They collect information on how people pay their bills.** **What is considered an excellent credit score? 781** **What six components that factor into your credit score, along with what percentage each component contributes to your credit score? Pay history is 40%, Recently reported balances in 11%, Credit utilization is 20% but you should aim for less than 10%, length of history is 21%, available credit is 3%, new credit accounts is 5%.**