Credit Newsletter

Stephanie Muralles

The Basics of Credit

Credit is the ability to borrow money in return of a payment back. There are different forms of credit like personal loans such as house loans, car loans, school loans and credit cards. Credit, however, is not free. You must pay interest (APR) in order to receive credit. In order for someone to get credit, your credit score must be high because the higher, the better. It also depends on your creditworthiness which basically reveals the type of person you are- ex: you pay your bills on time, you're an honest person, your credit score is great, etc. This information comes from the credit bureau. They take record of your credit and send it to different companies that wish to see your credit. Your credit report contains all this information that lenders request to see and is needed the time you apply for credit.

Vocabulary Watch

Terms to Know:

Credit Limit: The maximum amount of money you can use up to on a credit car. If you are on time with your bills and pay, then your credit limit goes up.

Credit: ability to borrow money in return for a payment. (paying it eventually when the bill comes.)

Credit Report: a record of your credit score and credit information. Usually provided by the Credit Bureau.

Credit Cards

A credit card is a card that a person can use to purchase an item if they don't exactly have the cash for it because the card has certain credits you can use (credit limit), but eventually pay up at the end of the month when the bill comes. You can use a credit card almost everywhere. However, you must pay an annual fee for the credit card that you own so you can keep using it. If you do not pay entire balance on time, you can pay a minimum, however, you will be charged an interest fee which is also knows as APR. If you go over-the-limit of credits you are allowed to use on your credit card, you then have a penalty fee. You have to pay off those extra credits used.

Don't Fall Into the Credit Card Trap

Don't want to be in debt? Well:

  • Don't buy something you know you won't be able to pay off by the end of the month
  • Be aware of your spending
  • Have a budget
  • Keep a check/credit card register