Consumer Credit | homework crew
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Summative Assessment: Consumer Credit WorksheetComplete Parts 1, 2, and 3 below to reinforce the influence that credit and debt have on your financial planning and decision making.Part 1: Credit ScoresCredit scores are calculated using information from your credit report. The score summarizes your credit history and helps creditors predict how likely it is that you will make timely payments or repay a loan. Lenders factor in credit scores for loan approval and interest rate decisions. The higher your credit score is, the better chance you have of being approved.Review the iGrad® activities located in this week’s Learning Activities folder to see how a credit score is calculated.Follow these instructions to complete the calculations for this assignment:1. Access the Loan Savings Calculator on the myFICO website.2. Enter 30-Year fixed in Step One.3. Enter your state in Step Two.4. Enter the amount you would expect to borrow to buy a home in Step Three and provide the same amount in the question below.5. Select 700–759 as your FICO® Score range in Step Four and select calculate.6. Input the monthly payment calculation below Monthly Payment for 700–759 Range in the Credit Scores Table below.7. Input the total interest paid calculation below Total Interest Paid for 700–759 Range in the Credit Scores Table below.8. Change the current FICO Score range in Step Four to 640–659 range and select calculate.9. Input the monthly payment calculation below the Monthly Payment for 640–659 Range in the Credit Scores Table below.10. Input the total interest paid calculation below the Total Interest Paid for 640–659 Range in the Credit Scores Table below.11. Calculate the difference between the Monthly Payment for 700–759 Range amount and the Monthly Payment for 640–659 amount and input it below Monthly Savings with a Higher Credit Score in the Credit Scores Table.12. Calculate the difference between the Total Interest Paid for 700–759 Range and the Monthly Payment for 640–659 and input it below the Total Interest Savings with a Higher Credit Score in the Credit Scores Table.Credit Scores TableWhat is the total loan amount entered?Enter your response here.Monthly Payment for 700–759 Range Monthly Payment for 640–659 Range Monthly Savings with a Higher Credit ScoreEnter your response here.Enter your response here.Enter your response here.Total Interest Paid for 700–759 Range Total Interest Paid for 640–659 Range Total Interest Savings with a Higher Credit ScoreEnter your response here.Enter your response here.Enter your response here.In a 35- to 50-word response, describe the top 2 factors used to calculate a FICO Score, including ways to earn the most points and raise a FICO Score.Enter your response here.Part 2: Credit CardsCredit cards are a very popular form of revolving credit. The average adult has more than 8 credit cards, including bank, retail, and gas cards. However, all credit cards are not the same. The cost of a credit card depends on the terms set by the lender, including finance charges, interest, and sometimes an annual fee. When paying your credit cards, it’s important to understand how interest is calculated and the perils of making the minimum payment.Follow these steps to complete the table below:1. Access the Credit Card Minimum Payment Calculator on the GreenPath™ Financial Wellness website.2. Use $5,000.00 as the credit card balance for all examples.3. Input the information from the Minimum Payment (Percentage) and Credit Card Rate (Interest Rate) columns in the Credit Cards Table into the corresponding Credit Card Minimum Payment Calculator sections.4. Input the Credit Card Minimum Payment calculations into the Credit Cards Table Monthly Payment (Percentage) and Total Payments (Interest Rate) columns. This will allow you to see how they affect total repayment.Credit Cards TableMinimum Payment (Percentage) Credit Card Rate (Interest Rate) Monthly Payment Total Payments2% 18% Enter your response here.Enter your response here.2% 13% Enter your response here.Enter your response here.5% 18% Enter your response here.Enter your response here.5% 13% Enter your response here.Enter your response here.In a 35- to 50-word response, explain how the interest rate and making the minimum payment affect the total amount paid.Enter your response here.Part 3: Home BuyingWhen considering renting versus buying a house, you can be guaranteed a lively debate about which is the best financial decision. There are solid reasons for both, so it can get a bit confusing. The primary thing to remember is that there is no “one size fits all” answer for this question. The best thing you can do is educate yourself to both sides of the debate. This assignment gives you the opportunity to explore the options and learn more about some of the requirements for a lender’s mortgage expectations.Complete the Rent vs. Buy Calculator exercise on The Truth About Mortgage website using your own information.In a 35- to 50-word response, describe the recommendation you received form the Rent vs. Buy Calculator exercise and your opinion of the recommendation.Enter your response here.Imagine that you are applying for a mortgage and the lender requires that your mortgage debt service ratio isn’t more than 30% and the debt payment ratio isn’t more than 38%.Refer to the amounts in the Income and Payment Tyles and Amounts Table below to complete the questions.Income and Payment Types and Amounts TableIncome and Payment Types Income and Payment AmountsGross monthly income $4,166After-tax monthly income $3,583Expected mortgage payment (including principal, interest, taxes, and insurance) $1,025Monthly car payment $300Monthly student loan payment $1501. Calculate the mortgage debt service ratio using the mortgage debt service ratio calculation on p. 86 of Ch. 2, “Financial Planning Tools: Personal Financial Statements and the Time Value of Money,” of Personal Finance.Enter your response here.2. ¬¬¬¬¬¬¬¬Calculate the ¬¬debt payment ratio using the debt payment ratio on pg. 86 of Ch. 2, “Financial Planning Tools: Personal Financial Statements and the Time Value of Money,” of Personal Finance.Ener your response here.In a 35- to 50-word response, explain why the lender would or would not approve this mortgage. Include the role that debt and credit scores play in the decision.Enter your response here.In a 35- to 50-word response, explain the concept of private mortgage insurance (PMI) and how it is determined.Enter your response here.
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