Credit and Debt, Part 3
Question 1: Explain how to build a strong credit history and maintain credit-worthiness.
Answer 1: You can build a strong credit history and maintain credit-worthiness in a number of ways. When first applying for credit, be honest; credit agencies will do a thorough background check and misinformation will only hurt your credibility. Avoid overextending yourself and only use credit when you can afford the repayment schedule. Make sure that you live up to all of the terms of the credit card and be on time with monthly payments. If you will not be able to make a payment, let the lender know; often they will work with you.
There are lots of good resources about Credit that you can find available.
Question 2: Explain why women have special credit problems and what they can do to overcome them.
Answer 2: Lenders once viewed women as credit risks because they could become pregnant and lose their jobs. The Equal Credit Opportunity Act (ECOA) removed creditors’ ability to consider marital status or child-bearing plans, and mandated lenders must consider a woman’s income on the same basis as the man’s. Divorced and widowed women may not have an established credit history, making it difficult for them to get credit. This can be avoided by using one’s own name when filling out credit card applications, reporting any information to the credit bureau using the maiden name, and keeping a separate credit file.
Question 3: Define line of credit, cash advance, and base rate.
Answer 3: Line of credit is the most credit a customer can have at any given time as determined by the issuer of the credit card. An applicant can request a certain amount, and this is taken into consideration along with the applicant’s financial status. A cash advance is a loan that banks or other financial institutions offer a credit card holder. The advance happens at a bank but the transactions are like merchandise purchases. Instead of receiving a good or service, the person receives a check or cash. When giving loans to individuals and small/medium size business, the rate of interest banks use is called the base rate.
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