The Basics of Credit
What is Credit?
Credit is the amount of money that is lent or made available under such an agreement. It all depends on the person's credit score. Which is a number that is assigned to a person that indicates to lenders the amount of money they can lend them. The amount of credit you have goes on your Credit report.
Where does it come from?
Credit is managed by the Credit Bureau who determines who has what amount of credit each person has.
What costs are associated with credit?
When getting a loan from a bank the Lender(person who lends you the money at a bank) will have to charge the person APR or Interest until they pay the loan off.
What determines if someone gets credit and how much they get?
The person's Creditworthiness determines the amount of money that can be given to that person. Personal Loans can also determine if someone can get a loan from the bank. The primary thing is one's Credit score that determines if they can get a loan or not. This can be effected by many things like not paying a Credit Card bill on time.
Terms to Know
Annual Percentage Rate (APR)- An interest on loans or credit.
Collateral- Something pledged as security for repayment of a loan.
Creditworthiness- The trustworthiness with money as based on a person's credit history.
Credit cards: What You Need to Know
What is a Credit Card?
A credit card is a card that is issued by the bank that you will be able to purchase items on credit and pay back the amount that was spent when the bill arrives. But, there is a Credit Limit to the card, so there is a limit to how much you can buy.
Where Can You Use Them?
Credit cards can be used in any place where they would accept them.
What are the benefits and costs of using credit cards?
The benefits of a credit card is that you can use it if there is an emergency if you don't have enough money at the time. The costs of a credit card is that they have Annual Fees that they will charge you every year. Another charge is APR if you don't finish paying off the bill that comes every month. You can also be charged a Penalty Fee if you pay late, and also an Over the limit Fee for if you go over the limit on the card.
Smart Consumers: Don’t Fall Into the Credit Card Trap
Ways to Stay safe with credit cards
One thing to be safe with credit cards is to not use them to buy anything you want to avoid a piled up bill at the end of the month. Make sure that the place you use your credit card in you get to see where they take your card. Don't use a credit card in a restaurant unless you can go and use it yourself and not have a waiter take it to charge you because they can easily take the your credit and start using it. Don't use a credit card to buy something on the internet unless it's a secure website.