Credit Unit

By: Genesis Leon Torres

The Basics of Credit

Credit is the ability to obtain services or goods before payment. A borrower receives money and agrees to repay the lender at some date in the future. Credit allows you to buy now with the promise of paying later. Some forms of credit are: student loans, mortgage loans, credit cards, installment credit, revolving credit, business loans, collateral loans, etc. The two costs associated with credit are the discount fee charged by the credit card processing company and the up-front cost of purchasing the equipment. To determine if someone gets credit you must analyze if the person pays bills on time, the length of the credit history, how much debt and how many accounts the person has, and the diversity of the credit accounts. You must demonstrate your credit score. A credit score is from 300 to 850. The higher the score the better benefits you get.


  1. Credit- Allows you to buy now with the promise of paying later.
  2. Credit score- A score between 300-850 and the higher the score the better for the consumer.
  3. Credit Bureau- Organizations to which companies apply for credit information to authorized users for a fee.
  4. Credit Report- Credit history of a person's past borrowing.
  5. Creditworthiness- History of repayment and credit score.
  6. Interest (APR)- Annual percentage rate.
  7. Lender- Person that lends money.
  8. Credit Cards- Plastic card issued by a bank for the purchases of good or services on credit.
  9. Personal Loans- Loan for personal use (family, education, vacations, medical,etc.) This loan is usually unsecured.

Vocabulary Watch

Important Credit Vocabulary Terms:

  • Grace Period- Certain period of time in which a loan allows payment to be received after the actual due date.
  • Credit limit- The maximum amount that you can charge to your credit card.
  • Debit Card- This card gives you access to your checking and saving accounts through ATM's and merchant purchases.

Learn About Credit Cards

What You Need To Know

A credit card is a plastic card issued by banks to borrow money or buy products and services on credit. Credit cards are accepted by stores, restaurants, online shops, hotels, gas station, etc. It might look that credit cards are to be used absolutely everywhere, but is not necessarily. Credit cards are great to be used on sales, but you have to be very careful what you buy because it is easy to buy more than what you need and unable to repay your debt back. Credit card offer great rewards, such as getting cash back and earn points for every dollar you spend in purchases. They can also help consumers stretch their monthly income. Some credit cards have an annual fee and all of them have transaction fees, in which they are charged each time the machine contacts the processor to give information.


  1. Annual Fees- Yearly cost of owning a credit card
  2. Credit Limit- The maximum amount that you can charge to your credit card.
  3. Interest Rate (APR)- Annual percentage rate
  4. Penalty Fees- Fees charges if you violate the requirements of your account.
  5. Over the limit fee- Fee charged when your balance goes over your credit limit.

Smart Consumers

Don't Fall Into the Credit Card Trap

How to stay safe while using credit cards?

The first thing that you should do to stay safe while using credit cards is sign the card as soon as you receive it and never keep the PIN code with your card. You should be smart while shopping online because online fraud can happen. You should also check your account frequently because the sooner you find a problem the easier it is to fix. If you lose your credit card, report lost or stolen card. Always protect your password, so never share your account information. Finally, handle receipts with care because you should save them to check against your billing statement.