All About Credit!

Sandra Maciak

The Basics

What is credit?

Credit is the ability to borrow $ and promising to pay it back in the future. Credit isn't free, in order to get a credit card or loan you have to pay interest.

What are the forms of credit?

There are two different forms of credit. One is a personal loan, a large sum of money that pays for a house, or schooling, etc. The other type of credit is a credit card. Credit cards come with a limit and are payed off every month.

What costs are associated with credit?

Credit isn't free, in order to get a credit card or loan you have to pay interest. If you are late on a payment, you may also receive fines.

What determines if someone gets credit and how much they get?

A credit bureau tracks your credit and gathers information about you. The only way to get good credit score on your Credit Report is to have Credit Worthiness. Lenders judge this using 3 factors: Character, Capacity, and Capital.

Important Vocabulary

CREDIT: The ability to obtain goods or services before payment, based on the trust that payment will be made in the future.

CREDIT SCORE: A credit score in the United States is a number representing the creditworthiness of a person, the likelihood that person will pay his dues.

PERSONAL LOAN: A loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity.

Credit Cards!

What is a credit card?

A credit card is a piece of plastic that you can use to purchase items, knowing that you have to pay them back at the end of the month.

Where can you use credit cards?

You can use credit cards anywhere, restaurants, stores, parks, anywhere that accepts them.

What are the benefits and costs of using credit cards?

The benefits of using a card are that people with jobs can spend more money. And they are also able to buy more goods. The costs of using credit cards are Annual Fees, Credit Limits, Interest Rates (APR), Penalty Fees, and Over-the-limit fees. Each of these fees are specifically designed to keep people in line and make sure they pay their debt on time.

DON'T fall into a trap!

Make sure you don't fall into a credit card trap. Here are some tips and tricks to help you manage your credit successfully.

  1. Try to pay off the entire amount at the end of the month. This way, you know you won't spend more then you can afford!
  2. Choose your card wisely! The less expensive, the more benefits you receive.
  3. Avoid getting too many cards, that might get confusing!
  4. Don't miss any payments! This will taint your credit score and give you unwanted fees.
  5. BE CAREFUL of identity theft!