Knowledge For Credit

Saira Botello

The Basics

Credit - an earned privilege - is the ability to borrow money with the promise of future payment. Credit can come in many forms, including but not limited to: credit cards,student or personal loans, mortgages, car payments, and furniture payments. Credit is beneficial in that it allows consumers to obtain necessities that they cannot pay for in full. Credit can also be disadvantageous in that it can lead to heavy debt and costs interest.

To determine if you're eligible for credit, you or the lender you're approaching for a loan can request your credit report from a credit bureau. On the credit report will be your financial history and your overall creditworthiness - how dependable you are when it comes to paying back loans. Your credibility will be expressed in a credit score on a scale of 300 to 850. The higher the score the better. Your credit score will also determine your interest or APR rate. The better your credit score the lower your rate.

Important Vocabulary You Should Know

Creditworthiness - This is the measure of how financially reliable a person is and is determined by the 3 C's:

Capital - The things of value owned

Capacity - Income vs. Debt, the ability to pay off loans

Character - The person's sense of financial responsibility and dependability

Credit Cards: What You Need To Know

Credit cards are plastic cards attached to checking accounts which can be used as a form of credit. They are accepted in stores, online, and over the phone while making purchases. Credit cards are not only convenient, but also can be used to improve your credit score by making regular bill payments. They often come with rewards. Along with the rewards are drawbacks to owning a credit card. Most important to realize is that an uneducated card holder is in the risk of falling into debt and ruining their credit score. Another disadvantage to credit cards are the many fees and conditions attached to them. They include but are not limited to:

Annual Fees: an amount to be payed by the cardholder every year

Credit Limit: the amount the cardholder cannot exceed each billing cycle

Interest Rate (APR): a percentage to be payed on each bill after the grace period, determined by the cardholder's credit score

Penalty Fees (including over-the-limit fees): fees to be payed when the conditions of the card are not met, such as an exceeded credit limit or an overdraft

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How To Get Good Credit Score?

Knowing your credit all comes down to numbers, the higher the numbers the better your credit is and we all want great credit so reach far for those numbers and pay your loans. All these factors listed below make up what is called your credit report that every company looks at when you are signing up for a loan/credit card. Your credit score says a lot about you and can be difficult to repair once it has been damaged so always pay on time.

Actual credit scoring:

300-850 (the higher, the better)

  • on time payments= good
  • low debt=good
  • long history=good
  • limited number of credit cards=good



  • Choose a card that best fits your needs
  • Pay your bill in full and on time each month to avoid interest rates and debt
  • Understand the terms and conditions of your credit card
  • Set a budget and stick to it
  • To avoid unauthorized credit card use, only make purchases with sellers you trust, shred paper documents, and don't keep your credit card information on your phone
  • Always check credit report
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