Applying for Credit Your score report basically determines how loan-worthy you are based on your credit history How many

1. Applying for Credit • Your score report basically determines how loan-worthy you are based on your credit history • How many credit cards to you have? • How well/ often do you make your payments? • You want a HIGH credit score • How do you apply for credit?-- A lender will hire a credit bureau to do a credit check on you… • Credit Bureau: private business that investigates a person to determine the risk involved in lending to that person • Credit Check: investigation of a person’s income, current debts, personal life & past history of borrowing/ repaying debts • These 2 things determine your credit rating… • Credit rating: rating of the risk involved in lending to a specific person/ business • Usually, someone offering a loan will want collateral insurance or a “guarantee” that you will pay them back • Collateral: something of value that a borrower lets the lender claim if a loan is not repaid • Secured loan: loan that is backed up by collateral • Unsecured loan: loan guaranteed only by a promise to repay it This is a RARE opportunity… take advantage of it! • Government Regulation of Credit • Laws protecting borrowers • Truth in Lending Act – requires creditors to keep consumers fully informed about the costs/ conditions of borrowing • Equal Credit Opportunity Act –lenders cannot deny you credit SOLELY on the basis of race, religion, gender, marital status or age • Personal bankruptcy • Too many loans, too much use of credit, piling on of debts not paid off = file for bankruptcy • Bankruptcy: state of legally having been declared unable to pay off debts owed with available income • If you file for bankruptcy, it stays on your credit record for 10 years!!!!! (good luck getting any loans/ credit)