Credit Project

consumer ed

What is credit?

Credit is borrowed money from the bank. Buy now pay later. Many use credit loans for important purchases like car, homes, and college tuition. Some people; however, seek credit in credit cards to buy other essential and personal loans.


Not everyone is given credit and not everyone is given the same amount of borrowed money. Lenders look at your credit score. Your credit score is basically how worthy you are of obtaining credit, determined by the credit bureau.

Credit Worthiness

CREDIT WORTHINESS:

  • Character

    • responsibility

    • steady job

    • steady residency

    • bills on time

  • Capacity

    • ability to pay loan back

    • high enough income

    • major expenses and debt

  • capital

    • value of what you own

    • savings, investments, property

    • use capital to pay loan if needed


All of these factors will will make up what is called a credit report. Credit reports are requested by lenders to view your history in the credit world. If the credit report is good, that means your credit score is good.


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

Credit Cards

Credit cards are plastic cards that hold money to purchase things. The money however is not in your checking account. That money is lend by banks because you are unable to obtain that money. They can give you a specific credit limit, depending on your credit score,that you can use and repay. Just like loans, you can buy now and pay later.


Where?

Credit Cards can be used at any place that accepts debit cards. You basically do not carry cash. You can even use the card online to your convenience.


Pros:

-you can use them practically anywhere

-they increase what you can buy

-you don't pay upfront, monthly payments

-some even give you cash back

-build credit history for other important purchases

Cons

-people feel obligated more than they need to

-some banks include an annual fee for just having the card

-annual percentage rates sometimes make it impossible to pay off the card

-can create debt for people who can't pay them off on time before APR increases

-easy to buy more than limit which then add a over limit fee

-have to make sure you pay them on time otherwise you'll get feed

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How to be safe

  • Pay off monthly payment: To avoid the build up interest rates, pay off what ever you spent one month, the next month. This way you will not get charged with interest rates. By not paying off every month you will start to create debt.
  • Spend credit on needs and not wants: It will be more convenient if you choose wisely and narrow your buys. It can be very hard not to spend more than you absolutely need and buy things that make you happy; however, your needs can wait. Debt is very serious.
  • Don't skip payments: If your truly cannot pay off the money each month at least make sure you pay your minimum. If you skip a payment not only what you owe will be much more, but your credit history and score will decrease. BY doing that, your chances of receiving loans will be low.
  • Use Credit Cards as a tool: If you can really pay off the card every month, than use it to help you track your budgeting. You can record every purchase you make. However, only do this if you have enough money in your checking account to pay the card off.