Credit Newsletter

Ana Guzman 7/8

The Basics of Credit

  • What is credit?
Credit is the ability to borrow money in return for a promise of future payment.


  • What are the forms of credit?

The forms of credit are personal loans and credit cards.


  • What costs are associated with credit?

Credit card costs and credit card fees are associated with credit. However, credit is NOT free. You must pay interest (Annual Percentage Rate). If you don't pay, then it will go on your credit report, and you will have a bad credit score.


  • What determines if someone gets credit and how much they get?

To get credit, you must demonstrate your creditworthiness. Lenders judge using three factors: character, capacity, and capital. Whereas, capital is the value of what you own, capacity is the financial ability to repay a loan, and character is the sense of financial responsibility. This information comes from the Credit Bureau, which collects information on consumers' credit and sells it.


Vocabulary Watch

  • Credit Report

Your credit report has all your credit information. This is provided by Credit Bureaus and requested by lenders. You have a credit report when you apply for credit. This is free once a year; otherwise, you pay a small fee. You must be careful not to get your credit stolen.


  • Credit Cards

Credit cards are like common cards. When you purchase with credit cards, your money is not automatically withdrawn from your account. You must pay interest (APR). If you go beyond the limit of your credit card, there will be a penalty fee or may be declined.


  • Credit Score

Your credit score represents your creditworthiness, the likely hood you will be able to pay. Your credit score should be between 300 & 850. The higher your score is, the better. On time payments, Low debt, long credit history, and limited number of credit cards reflect a good score.

Credit Cards: What You Need To know

  • What is a credit card?

A credit card is like a common card used to purchase things.


  • Where can you use credit cards?

You can use credit cards anywhere they accept them. You don't pay money at that time, you are borrowing money. Unlike debit cards, when using a credit card your money is not automatically withdrawn from your account.


  • What are the benefits and costs of using credit cards?


The benefits of a credit card is that you get cash back, you get points and airline miles. The costs of using a credit card include: annual fee, interest (APR), and there are credit limits.

You are required to pay an annual fee that varies from $15-$100. You need to pay interest (APR) when purchasing. If you pay the entire balance by due date, you pay no interest. Also, there is a credit limits, the maximum amount you can spend using a card. If you go over limit, you get a penalty fee or your card may be declined. Approximately $30 will be the charge for going beyond limit.

One of the credit card fees is penalty fees. These are additional fees due to late payment, over credit limit, returned payment, etc. This could also result in an increase in interest rate. The second and last fee is over-the-limit fee. This is simply going over the credit limit.


Smart Consumers: don't fall into the credit card trap

Consumer, be responsible with your credit cards. you should consider a loan as opposed to using a credit card, interest rate may be lower. Pay your credit card balance in full, avoid minimum payment trap. Choose your card wisely because the leas expensive it is, the greatest benefits you have. Also, avoid too many cards. This can get you into bad credit score. Other tips to consider are: don't miss payments, read what you sign, avoid identity theft, seek credit counseling if needed, and beware of bankruptcy. Lastly, keep track of everything you purchase with your credit card. This will prevent you from going into debt. Be smart and don't fall into the credit card trap!