05 Credit and Borrowing Free Online FlashCards

How does a loan differ from a revolving account?

A loan is repaid in scheduled installments; a revolving account lets you borrow and repay repeatedly up to a limit.

What does a credit report contain?

A credit report records borrowing and repayment information, such as credit accounts, balances, payment history, and collection accounts.

Why might credit reports from different bureaus vary?

Not every lender reports to every bureau or reports at the same time, so the information in reports can differ.

What does a credit score help lenders estimate?

A credit score is a number calculated from credit-report information to help lenders estimate the likelihood that a borrower will repay.

What factors commonly affect credit scores?

Common factors include payment timeliness, balances compared with credit limits, account age, recent applications, and credit-account mix.

Does carrying a credit-card balance improve a score?

No. Carrying a balance does not improve a credit score by itself.

Where can you request free credit reports, and what should you check?

You can request free credit reports through AnnualCreditReport.com. Review them for unfamiliar accounts, incorrect balances, or late payments you believe are wrong.

What should you do if you find an error on a credit report?

Dispute the error with the credit bureau and the company that supplied the information, and keep copies of relevant records.

What is the principal on a loan?

The principal is the amount borrowed.

What is interest?

Interest is the price paid for borrowing money.

What does APR express?

APR expresses the yearly cost of credit as a percentage. For many loans, it includes the interest rate and certain required fees.

How can a longer loan term affect borrowing costs?

A longer term can lower the monthly payment while increasing the total interest paid. Compare the term, fees, and total repayment, not just the payment.