By: Autumn Berg
What is credit?
Forms of credit:
Secured: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. An example of this is car loans and mortgage.
Unsecured: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.
Revolving: If your credit is revolving, the creditor has approved you for a set amount —your credit limit — and you can access the credit whenever you want and as often as you want. In return, you must pay the creditor at least a minimum amount on your account’s outstanding balance each month. An example of this is a credit card
Installment: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages, car loans, and student loans.
What costs are associated with credit?
How is your credit score calculated?
Interest (APR): the percentage of a sum of money charged for its use.
Credit Report: A record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy.
What is a credit card?
Where you can use credit cards:
Benefits & Costs
Convenience, helps budget expenses, can improve credit score
Annual fees: some credit cars charge a yearly fee
Interest rates: a rate that'll be charged to each purchase
Penalty fees: if you pay late, outside the grace period
Over the limit fee: when you spend over the credit limit
Ways to stay safe when using credit cards:
- Do make wise decisions about purchases
- Let creditor know in advance, if you cannot make a payment in time
- Stay within 30% of your credit limit
- Negotiate interest rate
- Use credit cards to make every day purchases
- Get into habit making minimum-only payments
- Use credit cards to buy things you cannot afford
- Close out a credit card without knowing how your credit will be impacted