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Chapter 6

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Jessica Goben

on 11 May 2010

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Transcript of Chapter 6

Credit "Charge it!" Credit is an arrangement to receive cash, goods, or services now and pay for them in the future. Consumer credit is the use of credit for personal needs (except for a home mortgage). Uses and Misuses of Credit Credit Reports 5 C's of Credit Identity Theft Helpful to buy now and pay later Borrowing for college education important "Shopaholics" and young adults are vulnerable Credit card companies make easy for students to get credit cards Make sure that the benefits of making the purchase outweigh the costs Misuses can lead to default, bankruptcy, and loss of creditworthiness Allows lenders to see credit history Can affect ability to get a job or insurance Limit borrowing to capacity to repay FICO score measures your credit worthiness on a scale from 300-850 Character Capactiy Capital Collateral Conditions Borrower's attitude towards his or her credit obligations Most important factor Borrower's financial ability to meet credit obligations Lender checks salary statements and other income sources Borrower's assets of net worth Greater the capital, the greater ability to pay loan An asset that is pledged to a financial institution to obtain a loan General economic conditions that can affect a borrower's ability to repay a loan Security-both job and firm that employs you Identity theft is the fastest-growing financial crime You never notice until some of your money has been used If your identity has been stolen the Federal Trade Commission recommends three actions 1. Contact the fraud departments of three major credit bureaus Flag file with fraud alert 2. Contact creditors for any accounts that have been tampered with or opened fraudulently 3. File a police report Prevent Identity Crisis Shred or tear charge recipts, copies of credit applications, insurance forms, bank checks and statemnts, expired charge cards, and credit offers Close accounts if you suspect something is wrong When you open new accounts get password-only access Stop payment if checks are stolen or misused If ATM card is lost, stolen or otherwise
compromised, cancel the card
and get a new PIN number
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