By: Luis Saucedo
The Basics of Credit.
● What is credit? The ability to borrow $$ in return for a promise of future payment
● What are the forms of credit? loans, credit loans, house, car, school, etc..
● What costs are associated with credit? Interest
● What determines if someone gets credit and how much they get? Your liability to pay back a loan and Character, Capacity, Capital. The 3 C's.
● Credit- The ability to obtain goods or services before payment, based on the trust that payment will be made in the future.
● Credit Score- Is a number representing the creditworthiness of a person, the likelihood that person will pay his or her debts.
● Credit Bureau- A company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions, etc.
● Credit Report- Credit history
● Creditworthiness- Trustworthiness with money as based on a person's credit history; a general qualification for borrowing.
● Interest (APR)- Describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc.
● Lender- The bank, mortgage broker, or financial institution providing the loan funds to a borrower.
● Credit Cards- A plastic card issued by a bank, business, etc., for the purchase of goods or services on credit.
● Personal Loans- A loan that establishes consumer credit that is granted for personal use
The Three C's Of Credit
Character: From your credit history, a lender may decide whether you possess the honesty and reliability to repay a debt. Considerations may include:
Have you used credit before?
Do you pay your bills on time?
How long have you lived at your present address?
How long have you been at your present job?
Capital: A lender will want to know if you have valuable assets such as real estate, personal property, investments, or savings with which to repay debt if income is unavailable.
Capacity: This refers to your ability to repay the debt. The lender will look to see if you have been working regularly in an occupation that is likely to provide enough income to support your credit use.
● Annual Fees-A yearly fee charged by credit grantors for the privilege of using a credit card.
● Credit Limit- A credit limit is the maximum amount of credit that a financial institution.
A credit limit is the maximum amount of credit that a financial institution.
● Interest Rate (APR)- The
percentage of a sum of money charged for its use.
● Penalty Fees-Fees charged if you violate the terms of your cardholder agreement or other requirements related to your account.
● Over-the-limit fee- Is charged when you exceed your credit limit through purchases, fees, or finance charges.
Is charged when you exceed your credit limit through purchases, fees, or finance charges.
Credit Cards & What you need to know.
● What is a credit card? A piece of plastic used as an alternative to currency.
● Where can you use credit cards? At any store pretty much or any business where you can build credit.
● What are the benefits and costs of using credit cards?
The reason is clear: Credit cards offer enormous advantages over other methods of payment. Although the danger of overspending with a credit card and running up major interest charges exists, those cardholders who use their credit card wisely can experience major benefits. That goes for even those credit cards that do not offer cash back, frequent flier miles, or other rewards programs.