Credit Smore

Joshua Harmon

Section 1: The Basics of Credit

In this section, you should discuss the basics of credit.

Questions to answer:

● What is credit? Credit is the ability to obtain goods or services before payment, based on the trust that payment will be made in the future

● What are the forms of credit?

Open Credit

This type of credit requires that all money borrowed must be repaid in full every month.

Revolving Credit

This is credit that allows you to borrow a pre-established amount repeatedly as long as your account is in good standing. You repay the amount borrowed in full or make a partial payment that is subject to interest and/or fees.

Installment Credit

This is credit that you use to borrow money and promise to repay in equal amounts over a specific period of time.

● What costs are associated with credit?

The primary costs associated with credit cards are the discount fee charged by the credit card processing company and the up-front cost of purchasing the equipment. The fee varies, among other things, on the type of card accepted and the method used to enter the transaction.

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

A person's credit score is extremely important, especially getting a loan from a lender, as it determines his or her eligibility for all kinds of financial endeavors, such as credit cards and home loans. A specific formula is used to determine the score, and it's based on whether the person pays bills on time, how much debt he or she has, the length of his or her credit history, how many new accounts the person has, and the diversity of the credit accounts. Knowing what criteria go into the number on a credit report can help a person maintain a good score and qualify for higher limits and better rates on loans.

A credit score may be anywhere from 300 to 850, with 300 being the most risky and 850 the most secure in the eyes of lenders. Therefore, a higher number will qualify an applicant for a better loan rate. A person with a number under 500 is unlikely to be able to secure any type of loan.

Section 2: Vocabulary Watch

In this section, you should highlight important credit vocabulary terms (at least 3).

check: a written order to a bank to pay a stated sum from the drawer's account.

Inflation: is the rise in the general level of prices of goods and services over a period of time.

payee: is a person to whom money is paid or is to be paid, esp. the person to whom a check is made payable.

Section 3: Credit Cards: What You Need to Know

In this section, you should discuss the basics of credit cards.

Questions to answer:

● What is a credit card?

A plastic card that allows you to purchase things without going over your credit limit.

● Where can you use credit cards?

Anywhere as long as it works

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

What are the benefits and costs of using credit cards? The benefits of credit cards are being able to pay for something that you may not have enough money for at the time. It comes in handy in emergency situations, or big ticket items. Costs associated with credit cards are the monthly payments, late fees for not making payments on time, interest (APR) on items you take years to pay off, over-the-limit fees for spending more than your credit limit, and fees for any misuse of the card, penalty fees.

Section 4: Smart Consumers: Don’t Fall Into the Credit Card Trap

The best thing to keep in mind when using credit is that you do have to pay for the item, it isn't free. People just swipe their card left and right, and forget that they are in fact ringing up their bill. This can lead to a lifetime of credit debt, and ruin your credit reputation. The smartest thing is to avoid using it unless its an emergency or need. Keep your payments low, and always pay more than the minimum. As long as you maintain responsibility and keep your credit in check, you'll be in good standing and avoid any possible debt.