Foundations of Credit

KNOWLEDGE EXPECTED OF: QAFP® Professionals

Highest Knowledge Level: Application

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

  • Explain key trends impacting debt† levels in Canada1, such as:
    • Growing debt-to-income ratio
    • Growing levels of consumer debt and mortgage debt
    • Historically low interest rates
    • Growth in non-mortgage borrowing secured by real estate 
  • Explain the potential impacts of debt on the ability to meet life goals, needs and priorities. 
  • Identify types of lending institutions, such as:
    • Chartered banks
    • Trust companies
    • Credit unions and caisses populaires
    • Brokerage houses
    • Mortgage and loan companies
    • Insurance companies
    • Government entities
    • Financing companies 
    • Co-operatives
    • Credit card companies
    • Payday loan companies
    • Commercial lenders 
    • Fintech (Financial Technology) companies
    • Private lenders
    • Crowdfunding sources 
  • Compare types of lending institutions, specifically:
    • Mandate 
    • Lending options 
    • Cost of doing business  
  • Define types of credit, such as:
    • Installment 
    • Revolving 
  • Define characteristics of credit, such as:
    • Unsecured
    • Secured
    • Closed 
    • Open
    • Fixed rate
    • Variable rate 
  • Compare types of credit, such as:
    • Unsecured versus secured
    • Closed versus open
    • Fixed rate versus variable rate

† Credit is the ability to borrow money, while debt is the result of borrowing money. When you use credit, you create debt.

REFERENCES

1 https://www.bankofcanada.ca/2021/05/financial-system-review-2021/ 

KNOWLEDGE EXPECTED OF: CFP® Professionals

Highest Knowledge Level: Application

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

  • Explain key trends impacting debt† levels in Canada1, such as:
    • Growing debt-to-income ratio
    • Growing levels of consumer debt and mortgage debt
    • Historically low interest rates
    • Growth in non-mortgage borrowing secured by real estate 
  • Explain the potential impacts of debt on the ability to meet life goals, needs and priorities. 
  • Identify types of lending institutions, such as:
    • Chartered banks
    • Trust companies
    • Credit unions and caisses populaires
    • Brokerage houses
    • Mortgage and loan companies
    • Insurance companies
    • Government entities
    • Financing companies 
    • Co-operatives
    • Credit card companies
    • Payday loan companies
    • Commercial lenders 
    • Fintech (Financial Technology) companies
    • Private lenders
    • Crowdfunding sources 
  • Compare types of lending institutions, specifically:
    • Mandate 
    • Lending options 
    • Cost of doing business  
  • Define types of credit, such as:
    • Installment 
    • Revolving 
  • Define characteristics of credit, such as:
    • Unsecured
    • Secured
    • Closed 
    • Open
    • Fixed rate
    • Variable rate 
  • Compare types of credit, such as:
    • Unsecured versus secured
    • Closed versus open
    • Fixed rate versus variable rate

† Credit is the ability to borrow money, while debt is the result of borrowing money. When you use credit, you create debt.

REFERENCES

1 https://www.bankofcanada.ca/2021/05/financial-system-review-2021/