Everything to know about Credit

By: Victoria Wielgus

What is credit?

A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date.

Different types of credit

Mortgages- Mortgages are loans distributed by banks to allow consumers to buy homes they can’t pay for upfront.
Auto loans - Like mortgages, auto loans are tied to your property. They can help you afford a vehicle, but you risk losing the car if you miss payments.
Payday loans-Payday loans are short-term, high-interest loans designed to bridge the gap from one paycheck to the next, used predominantly by repeat borrowers living paycheck to paycheck.

Personal loans- Personal loans can be used for any personal expenses and don’t have a designated purpose.

Student loans- Student loans are offered to college students and their families to help cover the cost of higher education.

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How to Build Credit from No Credit

    1. Get a secured credit card.
    2. Only charge what you can afford to pay off in full.
    3. Pay on time every month.
    4. Avoid applying for numerous accounts.
    5. Check your progress by checking your credit report and score.
    6. After a year, apply for an unsecured credit card.

    (Credit Bureaus names are in the image below were you could check your credit score)

How is credit determine?

Creditworthiness -Eligibility of an individual or firm to borrow money.

Character- Character refers to a borrower's reputation where financial matters are concerned

Will you repay the debt?

Capacity- A borrower's capacity is his financial ability to fulfill a loan's repayment terms.

Capital- Capital includes any money a borrower puts toward the investment for which he is getting a loan.

What if you don’t repay the debt?

Collateral- Personal assets pledged by a borrower as security for a loan are known as collateral.

Conditions-Conditions refer to the terms of the loan itself as well as any economic conditions that might affect the borrower.

The credit-based limit

Credit card companies turn to your credit history to help determine your card's limit. The process is similar to how issuers figure out the interest rate on your credit card,

What's a credit card?

A credit card is a card issued by a financial company giving the holder an option to borrow funds. Credit cards charge interest and are primarily used for short-term financing.

Things that come with having a credit card

  1. Annual fee: Exactly what it sounds like. Most student and youth credit cards don’t have an annual fee.
  2. Credit Limit - the maximum amount a credit card company will allow someone to borrow on a single card.

  3. Penalty fees
    • Late payment: If you don’t make the minimum payment within the grace period, you’ll have to pay this fee.
    • Over-the-limit: Sometimes, your credit card will let you go over your credit limit (the issuer can also choose not to). If it does, you’ll have to pay this fee.

Where can you use credit cards?

  • Stores
  • online
  • Almost anywhere
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