Ileana Carpena Period: 2

Basics of Credit

What is credit?

  • The ability to borrow money in return for a promise of future payment.
What are the forms of credit?

  • Prepaid credit cards that can help you establish your credit. Student credit cards make sure you sign your credit card as soon as possible.

What cost are associated with credit?

  • Annual fees are associated with the cost of credit.Also all credit card accounts charge interest on unpaid charges after the grace period. If you go over your credit limit than you will have to pay penalty.
What determines if someone get credits and how much they get?

  • To get a credit or loan ,lenders look to see if you qualify for creditworthiness which is the reliability for you to pay back a loan.They see if you have good character , the capacity to repay a loan, and capital which is the value of what you own, Lenders get all this information from a credit bureau which collect all credit history and sells it to lenders.

Vocabulary Watch

Credit Score: A number that determines a person's creditworthiness

Credit Report: A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a person's creditworthiness

Interest(APR): The annual rate that us charged for borrowing,expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.

Personal Loans: a loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity and ability to pay.

Credit Cards: What you need to know

What are credit cards?

  • A plastic card issued by a bank or business .It is used to purchase goods and services on credit
Where can you use credit cards?

  • You can use credits cards at stores,shops,and businesses.
What are the benefits and cost of using a credit card?

  • You may have to pay annual fees if the bank is able to issue this to you. Also all credit cards issue interest fees on unpaid balances.Almost all accounts have credit limit which is the maximum amount you are allowed to charge on the card.If you go over your amount you are required to pay a penalty.

Smart Consumers Don't Fall Into Credit Card Trap!

  • Do not go over your credit limit
  • Avoid paying penalties
  • Always send in your payments of credit cards at least a week before the due date
  • Always pay the amount owed , before the interest goes up on unpaid items.