Credit, Credit! Learn all about it

By: Aleiah and Liz :)

The Basics of Credit

What is 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.



Vocabulary Watch

Personal Loans: a loan that establishes consumer credit that is granted for personal use.

Credit Bureau: a company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions, etc.

Creditworthiness:

  1. Capital: the value of what you own. Includes savings, investments, property.
  2. Capacity: financial ability to repay loan. It's a high enough income for major expenses and debt.
  3. Character: They check your: sense of financial responsibility, dependability, steady job, long term residency.

Credit cards: What you need to know!

What is a credit card?



  • 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's:

  • 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'ts:

  • 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.