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Credits and Debt

by: Smccarty

Credits and Debt FAM 251

GPA 3.0

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About this Document

Why use credits, your own debt limits, good credit scores, sources of consumer credit, over-debited-ness and its relief
Personal Finance
Class Notes
finance, personalfinance
25 ?




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This 4 page Class Notes was uploaded by Smccarty on Monday October 10, 2016. The Class Notes belongs to FAM 251 at University of Kentucky taught by in Fall 2016. Since its upload, it has received 4 views. For similar materials see Personal Finance in Finance at University of Kentucky.


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Date Created: 10/10/16
Week 4 Notes October 6 and 11, 2016: Personal Finance Notes –Credit Credit Report & Credit Score Topics: Achieve a good credit reputation Why use credits Your own debt limits Credit Approval Process 1. Apply for Credit Good credit scores 2. The Lender obtains your credit history Sources of consumer credit a. Credit report b. 3 Credit Bureau Over-debited-ness and its i. TransUnion ii. Experian relief iii. Equifax 3. The lender decides whether to accept the application 4. Contrasts after once accepted credit card: credit agreement and loan promissory note Credit Report  What inform: o ID (name, address, SS#) o Your credit accounts (loans or credit cards) o Requests for your credit (inquiry) o Public records and collections (bankruptcy)  Where to get: Is your credit report wrong? – How to get it fixed! 1. Dispute the error with the credit bureaus 2. Directly contact the companies that reported the incorrect information 3. File a complaint with Consumer Financial Protection Bureau (CFPB) a. b. You’ll get a confirmation number immediately, email updates along the way, and be able to check the progress online Week 4 Notes Credit Scoring (or Rise Scoring) System: FICO Scores FICO Score Range: 300-850 Unfair Credit Opportunity Act (ECOA) FICO Score Breakdown - Unfair discrimination is illegal Length of - Based on income, race, identity (gender) credit - If credit is not good they may charge payment history higher rates than someone has who has better histoy 15% (this is not unfair) 35% Amounts Your credit reputation: owed 30% o Building a credit history: Types of  Open bank accounts (eg credit used 10% Taking on checking/savings) more debt?  Have your telephone and other utilities 10% billed in your name o Ask bank for a small short-term cash loan. October 11, 2016 Notes Describe sources of Consumer Loans : Topics: - Depository institutions - Non-depository institutions: do not receive money, only Why use credits lend money (they are a business) Your own debt limits They do not receive money from their consumers from but they lend it Good credit scores - Consumers finance companies o Ford, GM Car Sources of consumer credit - Sales Finance Companies o Very small money Over-debited-ness and its - Stockbrokers o If you need groceries, you go to relief Walmart, but the stockmarket uses stockbrokers, they lend money to you to buy stock - Insurance Companies Week 4 Notes o Lend money to you, based on your money What it Costs to Borrow $1000 for 5 years—What is their interest rate? LENDER APR MONTHLY PAYMENT LIFE INSURANCE 4 $18.42 COMPANY SALES FINANCE 6 $19.33 COMPANY CREDIT UNION 8 $20.28 COMMERCIAL BANK 10 $21.25 BANK CREDIT CARD 18 $25.39 CONSUMER FINANCE CO. 24 $28.77 Alternative Lenders: They are not the financial institutions, they are - Payday Lenders Most Americans live paycheck-to-paycheck - Rent-to-Own program o For example: Musical instruments - Pawnshop o 10% or 20% of sale is given to shop after sale is made Steps to Take to Get Out from Under Excessive Debt 1. Contact your creditors a. Letting them know that you are in a tight spot (you lost your job, you can’t pay your bills, etc. situation) and can you stop payments for “this” amount of time b. It is better for them in the long run because you will eventually pay the loan, you just cannot pay it now 2. Find good help a. Consumer Credit Counseling Service (CCCS): Apprisen Debt Collection Debt collection agencies For example: If you get dental work done Federal law regulates debt collection practices and it costs $1000, and ask you to go on a - Federal Fair Debt Collection Practices Act (FDC$20 a month plan, but you still have no money and you cannot pay, they cannot harass with the use of debt collectors under certain laws. Week 4 Notes Last resort: Bankruptcy - There are several debts you cannot “get out of” in bankruptcy (educational loans for example) - Know that you cannot re-declared for 6 years - One’s credit history for 10 years - Student Loans and taxes are not discharged o Chapter 7  Straight bankruptcy  Most of your assets are sold and applied to your debts  Many people have abused this over the past years and there has been changes since 2006 o Chapter 13  Wage earner or regular income plan  A portion of your debts are repaid over 3-5 years


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