Question

Assignment

• Define consumer credit and analyze its advantages and disadvantages.?

• Differentiate among various types of credit.?

• Assess your credit capacity and build your credit rating.?

• Describe the information creditors look for when you apply for credit.?

• Identify the steps you can take to avoid and correct credit mistakes and protect against fraud and identity theft.?

Answer 1

Define consumer credit and analyze its advantages and disadvantages.?

• Consumer credit is personal debt taken to purchase goods or service
• The Consumer Credit System allows consumers to borrow money or make a loan, and to review the repayment of that money over time
• If consumer credit rating is good means that consumer will pay norrowed amount 100% on time
• Lenders are less likely to borrow extra money from someone who is in debt

Advantages

• Revenue can be earned by business/ person before buying any goods or services
• Emergency situations can be better addressed
• Because credit cards are safe to carry, the United States is becoming increasingly sophisticated, where people often rely on credit for large and small purchases.
• Consumer credit industry is highly profitable where consumer can do delayed payment
• Banks and financial institutions, department stores, and many other businesses offer consumer credit

Disadvantages

• Cost of failure of credit is too high in credit system
• Consumer has to pay at rate of 18-21% on delayed payment
• The credit card department was 24.22%. One-time payment can increase the cardholder interest rate significantly.

Differentiate among various types of credit.?

Revolving Credit

• Credit Line is a single type of credit that comes with a limit and can be used up to a pre-determined threshold.
• It may include lower standard payments, but usually, there is no fixed payment system.
• An example would be a credit card as there is a limit (credit card limit), and you can continue to use it until you reach that limit (and then apply over the limit

Installment Credit

• Installment loans are another type of loan that includes a fixed payment schedule for a period of time.
• An example of an installment loan would be a car loan - you need to pay a fixed amount of money in a recurring space (eg $ 280 per month) until the full loan is paid.
• Other examples include loans, student loans, and long-term loans.

Open Credit

• Open debt is a type of debt that requires a full repayment for each period, such as a month.
• You can borrow up to a maximum amount, similar to the credit card limit, but you will need to repay the loan in full at the end of each term.
• An example of this would be a mobile billing - you can make calls, send messages, and use data each month, and at the end of the month, you need to pay for the services you use (including any other usage costs).

Assess your credit capacity and build your credit rating.?

Regualr and timely pay your installments

• Repayment of a credit card or loan repayment on a due date is said to be the highest weight on all factors considered when calculating your credit score.
• Therefore, timely payment of your credit card debt can build up your credit score, and thus improve your credit and credit card eligibility.

Contains your credit limit within 30%

• Credit rating rating means the total of your credit card limits used by you.
• Given that lenders generally view credit card users with more than 30% CUR as a sign that they are hungry for credit, credit bureaus tend to reduce your credit score by a few points in violation of this mark.

Don't ask too many questions for lenders

• Once you apply directly for a loan or credit card, the lender downloads your credit report from the credit bureau to assess your creditworthiness.
• Such lenders initiate credit report requests are called difficult questions, each of which is listed in your credit report and then your credit score decreases by a few points.
• Therefore, making multiple loan inquiries in the short term will greatly reduce your credit score.

Periodically update your credit report

• Your credit is calculated primarily on the information provided by creditors and card issuers.
• Therefore, any incorrect information included in your credit report, either due to writing errors from the lender / issuer of the card or due to fraudulent transactions on your behalf, could damage your credit score.

Get a secure credit card, if you are denied a standard one

• Not all credit card issuers issue credit cards to 'new credit' buyers, i.e. those with no credit history. Many also fail to get credit cards because of their inadequacies, job profile, employer's profile and because of their uncontrollable locations.
• Such customers may check for the availability of secure credit cards, issued with a fixed payment amount included in batches.

Describe the information creditors look for when you apply for credit.?

Profit loss statement

• There is no universal definition of debt - your permit issues depend on the debtor and the financial product.
• Your credit eligibility may depend on whether you apply for a mortgage, as lenders may exempt or limit their requirements for various purposes.
• You may not be able to gain an understanding of the specific needs of the product you are applying for

Collateral

• If you are applying for a secure loan, such as a car loan or mortgage loan, the lender will also look at the details of the property you are using as collateral.

Information character

• Lenders can use information directly from your credit reports to determine your credit eligibility, such as using your monthly obligations to obtain your DTI

Credit Score

• Many companies use credit score or points to help assess an applicant, while others may require you to have more credit than a certain point in order to qualify for a credit card or loan application

Identify the steps you can take to avoid and correct credit mistakes and protect against fraud and identity theft.?

• A review of your credit reports will help you identify potential mistakes. You can check once a year or, as there are three main credit reporting frameworks, check one report every 4 months. You may then dispute the incorrect information with the credit reporting agency
• Fraud alert adds an extra layer of protection to your credit report. Fraud alert is highly recommended if you have been the victim of identity theft
• Security suspensions prevent new lenders from accessing your credit file and others from opening accounts on your behalf until you freeze. This makes it difficult for patents to open new financial accounts on your behalf
• Regular updating of your bank statements and credit card captures unsolicited transactions and lets you notify your bank immediately
• Ownership and credit monitoring services scan your credit reports and alert you in the event of a change