Topic outline
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It is hard to think about going through a day without having some interaction with consumer credit; that is, either using it or having it offered to you. Consumer credit, and by this we are referring to what is known as open account credit, the ability to access funds for an unspecified purpose up to a pre-specified limit, allows you to acquire goods and services and defer payment on these items. Consumer loans, another form of consumer debt, will be the subject of the next topic.
To gain access to this open account credit you need to have prior approval from the credit provider. This provider could be a bank, finance company, or similar institution (e.g., a bank Visa card or an American Express credit card), or even a store at which you frequently shop (e.g., a shop credit card at a major retailer). Key questions that we will address in this topic are: Should you accept offers of credit from these providers? Should you use this form of credit? When is the use of credit a potentially good thing in the context of the personal financial plan?
In gaining access to open account credit, both the number of offers you receive, and the cost of each offer, will reflect these credit providers’ assessment of your ability to pay back the credit used. One way for them to gain information on this ability is to examine your personal credit score/rating.
So, we will also be discussing what this is, where the information is sourced, and what you can do to ensure that the credit risk picture that your present is the best it can be.
Presentation length: 2m 28s
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