CSM 204 Chapter 6 LectureOutline of Previous LectureI. Cash Management StrategyII. Common Cash Management MistakesIII. Types of Financial ServicesIV. Online and Mobile BankingV. Financial InstitutionsVI. Choosing a Financial InstitutionVII. Savings PlansVIII. Evaluating Savings PlansIX. Payment MethodsX. Types of Checking AccountsXI. Evaluating Checking AccountsXII. Managing Your Checking AccountXIII. FDIC CoverageXIV. How Identity Theft Occurs: Getting Your InformationXV. How Identity Theft Occurs: Using Your InformationXVI. Minimizing Identity TheftXVII. The Victim’s First 3 StepsXVIII. The Victim’s Next StepsXIX. Quiz 1-5Current Lecture OutlineI. Consumer CreditII. Consumer Credit QuestionsIII. Advantages of CreditIV. Disadvantages of CreditV. Types of CreditVI. Protecting Against FraudVII. Online PurchasesVIII. Measuring Credit CapacityIX. Your Credit ReportX. Fair Credit Reporting ActXI. Applying for CreditXII. FICO Credit ScoringXIII. Other Credit Scoring SystemsXIV. Correcting Credit ErrorsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.XV. Quiz 2-1Current Lecture Chapter 6- Introduction to Consumer CreditConsumer CreditAn arrangement to receive goods or services now and pay laterCredit used for personal needs other than a homeTies up future incomeConsumer Credit QuestionsDo I have cash for a down payment?Should I use savings?Does the purchase fit my budget?Is there a better use for the money?Can I postpone the purchase?What are the opportunity costs?What are the psychological and dollar costs of using credit?Advantages of CreditCurrent use of good and servicesMedical EmergenciesMay purchase when funds are lowNeeded purchases when funds are lowSafer than cash or debit cardsAS LONG AS YOU PAY IN FULL EACH MONTHCushion for emergenciesEasier to return merchandiseConvenient when shoppingOne monthly paymentNeeded for reservations and online purchasesFloat time and grace periodRewards programsCash backMerchandiseAccidental death and dismemberment insuranceAuto rental insuranceRoadside assistanceIndicates financial stabilityDisadvantages of CreditTemptation to overspendPotential damage to credit ratingDoes not increase total purchasing powerCredit costs moneyMinimum payment temptationTypes of CreditClosed-EndedA specific purchaseInstallment loanCar loanSingle pay loanDefined by what you walk away with after you sign the loanOpen-Ended (Revolving Credit)Credit cardsLines of creditSmart CardsDebit CardsStore Value CardsTravel and Entertainment CardsSmart PhonesHome Equity LoansProtecting Against FraudSign new cards immediatelyKeep cards secureShred documents with account numberDon’t give out account number over the phone unless initiated by youGet at keep receiptsReport lost or stolen cards immediatelyCheck your credit reportOnline PurchasesUse secure browserKeep records of transactionsReview monthly statementsRead policies of websitesShop at businesses your trustNever give out your passwordDon’t download files sent by strangersMeasuring Credit CapacityCheck your budgetCompute the ratiosDebt Payments to Income RatioDebt to Equity RatioCo-signing affects your capacityGuaranteeing someone’s debtYou may have to payCan damage your credit ratingYour Credit ReportBuild and maintain you ratingLimit borrowingPay on timeControl the number of inquiriesCredit BureausEquifaxTrans UnionExperianFair Credit Reporting ActRegulates the use of credit reportsCompanies must correct inaccurate or incomplete informationOnly authorized persons have access to your informationAdverse data can be reported for 7 years and bankruptcy for 10www.annualcreditreport.comApplying for CreditThe Five C’s of CreditCharacterCapacityCapitalCollateralConditionsFICO Credit Scoring35% Payment History30% Amounts Owed15% Length of Credit History10% Types of Credit Used10% Taking on More DebtOther Credit Scoring SystemsTrans UnionVantageImproving your Credit ScoreGet copies of your credit report and verify that the information is correctPay bills on timeUnderstand how the score is determinedLearn the legal stepsBeware of credit repair scamsCorrecting Credit ErrorsNotify creditor in writing within 60 daysInclude account number and explanation of errorThey must respond within 30 daysTwo billing cycles but no longer than 90 days to make correctionCredit rating unaffected while item is in disputeConsumer Credit Laws (pg. 219-220)Truth in Lending ActEqual Credit Opportunity ActFair Credit Billing ActFair Credit Reporting ActConsumer Credit Reporting Reform ActFair and Accurate Credit Transactions ActCredit Care Accountability, Responsibility and Disclosure ActQuiz 2-11. True2. Installment Loans3. Climate4. Seven5. Credit