Learning about Credit.

The Basics of Credit

What is Credit?

Credit is money that a person does not have and it is borrowed. People have to pay it back after it has been used. The person or institution is the lender.

What are the forms of credit?

Credit includes credit cards, bank loans, and mortgage.

What costs are associated with credit?

These loans must be payed back with interest. The interest rate varies. People that have higher credit score will have a lower interest because they are more credit worthy.

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

Credit Bureaus determine your credit score. They report your records to credit lenders. Bad credit score will give you less credit and higher interest while a good credit score will give you more credit and lower interest.

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Important Vocabulary

Annual Percentage Rate (APR)

APR is the rate of the interest. This is the percent of the loan that you will have to pay extra.

Credit Bureau

An institution that analyzes your credit worthiness. Reports to credit lenders.

Credit Rating (Score)

Rating given to you. Higher credit score leads to more credit available and a lower interest rate. Lower credit leads to less credit available and higher interest rate. It is determined by a Credit Bureau.

Credit Cards: What You Need to Know

What is a Credit Card?

A credit card is a card given by the credit lender, usually a bank, that can be used like a debit card but uses credit available on card.

Where can you use Credit Cards?

Credit cards can be used in places that accept credit. People sometimes use it to pay expensive items such as electronics or furniture.

What are the benefits and costs of using a credit card?

The benefits of credit cards include: having extra money available, being able to pay later, and having money you don't really have.

The costs of credit cards include: having to pay extra on an item based on interest rate, credit has an interest, sometimes you have to pay an annual fee to use a credit card, and it can get you into debt if not used responsibly. There are also more fees when using a debut card such as a penalty fee, in case the payment for item is late, and a over-the-limit fee, in case the user uses more of the credit than it is available.

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Smart Consumers: Don't Fall Into the Credit Card Trap

Keep Card Safe

Do not lose your card. It can lead to identity theft and uses of your credit. The person my use your credit and ruin your credit worthiness. Keep card close to you in a safe place.

Be Responsible

Don't overuse your card. Overusing your card might lead to fees. Not being able to pay those fees plus the loans made to you with your credit card will lead to debt. Interest will keep accumulating on your credit. Ultimately, your credit score will decrease and will have a bad credit Worthiness.