Glossary Building 5

Financial health comes in a close second to physical health, in my opinion. Having good credit is necessary to secure loans for your education, buying a house or renting an apartment, and even some employers have a look at your credit during the hiring process. Unfortunately, a lot of people are not taught this skill at home or in school. But there are many resources to help you build your knowledge.

An important skill to learn is Financial Literacy which is defined as “the ability to effectively understand and use various financial skills (Fernando, 2021).” This could be your personal finances, budgets, and how to invest your money properly. Predatory Lending imposes unfair and deceptive loan terms on the borrowers (Hayes, 2021). These practices were especially prevalent in 2008 and are thought to be the reason for the housing crisis. Many states have even enacted anti-predatory lending laws. Credit Repair companies are another example of how consumers can be exploited in times of desperation. Consumers are protected through The Credit Repair Organizations Act which “prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of “credit repair” services” (Federal Trade Commission, 2016). It necessary to take a proactive approach and learn about loan practices and personal finance management if you want your financial health to in great shape.

Financial Literacy- The ability to effectively understand and use various financial tools

Predatory Lending- Unfair and deceptive loan terms

The Credit Repair Organizations Act- prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of “credit repair” services

References:

Credit repair Organizations Act. Federal Trade Commission. (2016, July 26). https://www.ftc.gov/enforcement/statutes/credit-repair-organizations-act.

Fernando, J. (2021, June 2). Financial literacy. Investopedia. https://www.investopedia.com/terms/f/financial-literacy.asp.

Hayes, A. (2021, July 22). Predatory lending. Investopedia. https://www.investopedia.com/terms/p/predatory_lending.asp.