By: Jenny Guevarra

Basics of Credit

General Questions

● What is credit? Credit is the ability to borrow money

● What are the forms of credit? The 2 forms of credit are personal loans and credit cards

● What costs are associated with credit? Interest, the annual percentage rate(APR)

● What determines if someone gets credit and how much they get? By your creditworthiness(are you able to pay back) and the Lender checks that by looking at The 3 C’s: Character, Capacity, and Capital. The person who carries that information along with your credit score and credit report is the credit bureau.

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Words to know..

Premium- An amount to be paid for an insurance policy.

Collateral-Something pledged as security for repayment of a loan.

liability-Any type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time

More information about credit:

● What is a credit card? Basically a A plastic card issued by a bank, business, etc., for the purchase of goods or services on credit.

● Where can you use credit cards? You can use credit cards anytime when shopping but just make sure you’ll be able to pay it back later

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

Credit Card Costs

  • Annual Fees

  • Credit Limits(There’s only a certain amount you can spend on a credit card but if you spend over that amount you get charged an over-the-limit fee)

there are additional penalty fees for any other payments although sometimes it can increase the interest rate(APR)


  • Consider loans rather than credit cards because sometimes interest rates can be lower

  • Avoid having more than one card

  • don’t miss payments