Joselin Treto

The Basics of Credit

What is credit? Credit is money you can use for big purchases and pay it off later.

What are the forms of credit? Personal loans, credit cards, house loans, student loans.

What costs are associated with credit? Interest APR could go up and end up having a bad credit score or credit report because of the late fees on your credit card payments.

What determines if someone gets credit and how much they get? By the 4 C's: Creditworthiness, character, collateral, and capacity. Also from looking at their credit score, credit bureau .

Vocabulary Watch

A credit bureau is a private firm that maintains consumer credit data files and provides credit information to authorized users for a fee.

A lender gives (money) on condition that it is returned and that interest is paid for its temporary use.

Interest (APR) is annual percentage rate: the annual rate of interest; the total interest to be paid in a year divided by the balance due.

Credit Cards

A credit card is a card that you can use to buy anything you would like and pay it off later at the end of the month. You can use the credit cards when you want to go shopping for clothing, cars, and furniture. It's instant money, but not free money. The benefits from using credit cards is that you are able to buy anything you would like, but be careful because you will have to end up paying for it. A credit card annual fee is a yearly fee, usually ranging from $15 to $300, that's charged by the credit card company for the convenience of the credit card. There are also penalty fees from not paying your payment on time. You can also go over the limit of what some credit cards give you. If you go over the limit of $1000 you may be charged for that. Your APR will go up by the end of the year if you don't pay the payments of the credit cards on time.

Smart consumers

To be a smart and responsible consumer, check your credit report once a year to be sure you've been making your payments on time and you aren't being penalized for something you shouldn't be. Don't max out on the credit card like buying everything you see in your sight. Be smart on what you buy. If you think you can't afford what you are wanting to buy, then don't buy it. When you are trying to pay off something, try giving more than the minimum payment. Keep you personal information to yourself because people can steal your identity.