Credit, Credit! Learn all about it
By: Aleiah and Liz :)
The Basics of Credit
- Credit is made up of information about your borrowing history. Most of the information comes from your credit reports.
- "Buy now.. Pay later"
Forms of credit:
- Secured: where you are lent money against the value of a personal loan such as a house or a car.
- Unsecured Credit: Riskier proposition for lenders because they do not have the security of assets that could be taken and sold if you've failed to make your payments.
- Fixed-Termed Credit: a loan for a given period of time, must be payed within that period of time.
- Openended Credit: given a credit limit and can spend only that amount each month - anything you own or interest that has been carried over from the previous month
Costs that associate with credit:
- Annual fee interest: required annual amount of money that you must pay
- Interest (APR): pay entire balance by due date = no interest
- Credit limits: maximum amount of money you could spend on your credit card
Qualifications for approving for credit:
- Credit report includes: credit history and credit score. Provided by the credit bureaus. Credit bureaus have a record of every adult and they assign your credit rating.
- In order to prove your creditworthiness your credit score must be between 300-850. The higher the score the better.
Credit Bureau: a company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions, etc.
- Capital: the value of what you own. Includes savings, investments, property.
- Capacity: financial ability to repay loan. It's a high enough income for major expenses and debt.
- Character: They check your: sense of financial responsibility, dependability, steady job, long term residency.
Credit cards: What you need to know!
- A credit card allows you to borrow money from your bank to make purchases whether you're buying a burger or a round trip ticket to France.
Where can you use this plastic little card?
- You can use credit cards pretty much for anything. Anywhere that accepts credit cards, it's just as easy as a single swipe to use it.
Benefits of using a credit card:
- Able to make a large purchase now and pay it off later in smaller chunks
- Budgeting is easier
- Easier than carrying around a wad of cash
- Build up your credit score which will be useful later in life when buying a house for example
- You can get certain incentives such as cash back, points, airline miles
The costs of using a credit card:
- Annual fees: some credit cards charge an annual fee
- Interest rates: a rate that will be charged for anything you didn't pay off the month before
- Penalty fees: if you pay late outside of the grace period
- Over the limit fee: when you spend over the credit limit
- Easier to dig yourself into debt
Smart Consumers: Don't Fall Into the Credit Card Trap
- Do sign your plastic cards with permanent ink immediately upon receipt.
- Do memorize your card PIN. Do not have it written down and placed in your wallet. If you forget it, call your Co-op Credit Union and we'll help you get another.
- Do remember that your credit cards and check cards are as good as cash. Treat them that way.
- Do carry only the cards you plan to use.
- Do store unused cards in a secure, locked place.
- Do review all plastic card transactions carefully, and immediately report anything you find unusual, or transactions you don't recognize.
- Do inventory all plastic cards and keep a listing separate from where you store your cards.
- Do take receipts with you (including carbons) or tear them up before they are thrown away.
- Do routinely check your credit report for any unusual or unrecognizable activity.
- Do notify the post office to put a hold on your mail when you're out of town; or arrange for a trusted friend or neighbor to collect your mail each day.
- Don't loan your cards to anyone.
- Don't keep your Social Security number in your wallet.
- Don't keep personal information in your desk at work.
- Don't give your card, card number, Social Security number or PIN to anyone.
- Don't write your plastic card number on a personal check.
- Don't give pertinent personal information such as account numbers, your Social Security number, or PIN over the phone.
- Don't allow your card out of sight during a sales transaction.