Basics of Credit
Able to borrow money in return for a promise of future payment
Student loans, loans, and credit cards
Credit is not free. You have to pay interest. (APR or annual % rate). Fees on late payments, over-the-limit, and penalty fees.
To get credit, you have to demonstrate the 3 C's of credit for worthiness.
Capital is the value of what you own such as property, savings, and investments. Capacity determines your financial ability to pay back a loan. Character is your sense of financial responsibility; steady job, residence, if you pay your bills on time. Who gets all this information from you? The Credit Bureau. They have a record for every adult and give you a score from 300-850 which is reflected by your creditworthiness. This is called your Credit Score. The higher your score, the better. Your Credit Report has all your credit information and credit score. It's provided by Credit Bureaus and requested by lenders. Personal loans can be given to you and based on your credit, they're able to determine whether or not you're able to pay them back, your APR, and the time frame.
Annual Percentage Rate (APR)
Interest fees paid in a period of time
Score between 300-850 that determines your credit. Effects are on time payments, low debt is good, long history, and having limited number of credit cards. The higher your score; the better.
Plastic card issued by a bank or business that lets you purchase goods and services with a promise to pay back in the future.
Credit Cards: What You Need to Know
Smart Consumers: Don't Fall Into the Credit Card Trap
- Consider loan before using a credit card: interest rate may be lower
- Pay credit card full in balance
- Choose card wisely: least expensive; greatest benefits
- Avoid too many cards
- Pay cash
- Don't miss payments
- Read what you sign
- Beware of bankruptcy