1.

Define the following:

a. Credit- the ability to borrow money from someone else with the agreement to pay it

back later.

b. Creditors- also known as lenders, persons, businesses, and service providers. They

are the people who lend money to debtors.

c. A Debtor- a person who borrows money from others, and the money borrowed is

called debt, which must be repaid.

d. Income- money received from work or through investments.

e. Capital- wealth in the form of money or other assets owned by a person after

deducting your debts.

f. Revolving Credit- the credit that you can borrow on an ongoing basis; it has interest

rates, a spending limit, and monthly payments.

g. Charge Cards- cards issued by retailers that can be used only in their business.

h. Open Credit- a type of credit that requires full payment for each period, such as per

month.

i. Installment Credit- a loan with a specific sum of money you agree to repay in a set

period of time by making monthly payments that include interest and fees.

j. A Loan- when money is given to another party to repay the principal loan amount

plus interest. They are agreed upon before any money is exchanged.

k. Rewards- earn cash or points back from the money you spend on your card that can

be used for future purchases.

l. Interest- the amount of money the credit card company will charge you unless you

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 pay off your balance each month.

m. Simple Interest- interest based on the principal amount of a loan or the first deposit

in a saving account. (doesn’t compound)

n. Annual Percentage Rates (APR)- yearly interest rate on a card.

o. A Credit Score- a number that represents your credit worthiness to lenders. (300-

850)

p. Grace Period- a set amount of time payment can be delayed without a penalty.

q. Incentive Buying- a premium offer such as a gift, discount, or merchandise in hopes

of encouraging a purchase.

r. Credit Ratings- a rating assessment based on your creditworthiness to pay back debt.

s. Credit Reports- a report about your credit activity and credit situation, such as loan

history and status of your credit accounts.

t. Credit Statements- a summary of your credit card activity, bills, and additional

information.

u. Title Transfer- a change in ownership over gods or property.

v. Co-signing- a joint signing of a loan or lease with another person to guarantee

payment.

w. Foreclosure- a legal process in which a lender repossesses and attempts to sell a

borrower’s property when they fail to make their payments.

x. Bankruptcy- a legal proceeding involving a person or business that cannot repay all

its outstanding debts. Usually imposed by a court order initiated by the debtor.

y. Collateral- something pledged as security for repayment of a loan, to be forfeited in

the event of a default.

2. To use credit, you first must qualify; to qualify, the bank needs to be assured that you can

make your payments and pay off your debt. Otherwise, you could get yourself into some

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 serious financial issues.

3. It would be best if you considered the following when deciding on using credit:

a. Income

b. Capital wealth

4. 5 Advantages of Credit:

a. Purchase Power

b. Financing

c. Emergencies

d. Safety

e. Helps build your credit score

5. 4 Disadvantages of Credit:

a. Overspending

b. Opportunity cost of credit decisions

c. Fees and Finance Charges

d. Identity Theft

e.

6. 4 types of Credit:

a. Revolving Credit

b. Charge Cards

c. Open Credit

d. Installment Credit

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7. Once you have a credit card, you need to do the following:

a. Know your credit card limits.

b. Make reasonable purchases with your card that you can quickly pay off on time.

c. Make your monthly credit card payments.

8. Why do you want to have a good credit history?

a. It will help you have a good credit score.

b. It allows banks to see your ability ot pay off debt and how responsible you are for

future credit.

c. Can affect your future when getting a loan to purchase a house, car, business, etc.

9. How do you get a credit card or loan?

a. Make a list

b. Check your credit score

c. Research

d. Shop around

e. Compare your top choices

f. Read the fine print

g. Apply online or in your bank

10. What are the two popular factors in why someone chooses a credit card?

a. Rewards

b. Interest

11. What are the key terms to know for calculating interest rates?

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 a. Principal

b. Interest

c. Rate

d. Time

12. Why does a credit score matter?

a. It can help you apply for loans such as houses or cars, health insurance, and can

help you get a large credit amount on your credit cards, etc.

b. A bad credit rating cause increases in the cost of using credit.

13. How to establish a good credit score?

a. Get a credit card and be sure to make payments on time. Be sure to use it often, but

make sure you can pay your bills.

b. Open and maintain a checking or savings account.

c. Don’t apply for too many credit cards. Having too much debt can be a problem.

14. What are 4 tips for a credit score?

a. Review your statements monthly.

b. Set reminders to make payments.

c. Check your score often.

d. Be in contact with the bank if you ever have questions or concerns.

15. What are 7 tips on how to repair a credit score?

a. Check and fix any errors in your credit report.

b. Start paying bills on time.

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 c. Pay down other debts.

d. Up your credit line.

e. Keep old credit cards open.

f. Don’t take out credit unless you need it.

g. Work with a credit repair company.

16. Give 9 strategies for effective debt management:

a. Have a payment strategy.

b. Always know what you owe.

c. Make your minimum monthly payments.

d. Check your accounts often.

e. Have a priority list of which debt to pay off first.

f. Have an emergency fund to have access to if need be.

g. Check your credit report.

h. Look for opportunities to consolidate.

i. Get professional assistance when you need help or have questions.

17. Credit is an excellent tool if used wisely; if used poorly, it can have an extreme and

damaging effect on your personal finances and life.

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