Credit Newsletter

Jocelyn Gutierrez Period 7/8

The basics of credit

What is credit?

Ability to borrow money in return for a promise of future payment.

What are the forms of credit?

Forms of credit: loans, credit cards, house, car and school.

What costs associated with credit?

Credit is not free, it must pay interest. Either APR or annual % rate.

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

To be able to get credit you have to demonstrate creditworthiness. Meaning if your reliability to pay back a loan.

3 factors: Character, capacity and capital.

Vocabulary Watch

Creditworthiness- the reliability to pay back a loan

Lenders Judge

Character-sense of financial responsibility

  • Steady job
  • Dependability
  • Residence

Capacity- Financial ability to repay loan

  • high enough income
  • major expenses & debt

Capital- value of what you own

  • savings, investment, property
  • use capital to pay loan if needed

Credit Cards- cash back, points, airline miles

Common cards:

  • VISA
  • Master Card
  • Discover
  • AMEX

Regular charge accounts

  • must pay balance in full

Revolving charge accounts

  • can carry balance from month to month

Credit Score- a number representing the credit worthiness of a person

The higher the score the better it is

Effects on score

  • On time payments
  • Low debt
  • Long history
  • Limited # of credit cards

These are all good scores for credit

Credit Cards

What is a credit card?

A card by a bank to purchase of goods or services on credit

Where can you use credit cards?

You can use credit cards anywhere they accept it.

What are the benefits and costs of using credit cards?

Annual Fee-

  • required annual money amount you must pay

Interest (APR)

  • 0% to 29%
  • Pay entire balance by due date= no interest

Credit Limits

  • Max amount you can spend using cards
  • Over limit= penalty fee or declined
  • Approximately $30 for each charge made beyond limit

Smart Consumer

When using a credit card you need to be real responsible and think wisely about spending money. If you spend more than the limit it's a chance you have to pay a fee or even stay on debt. Always pay credit card on time so your credit doesn't go down. Stick to one credit card and beware of bankruptcy.

The good thing about credit is that it allows you to buy anything and it all impacts on the economy. The people with jobs are always able to spend more money. The more goods the more people make goods which equals to more jobs. The bad thing about it is that people overuse credit. If it decreases demand for goods it also decreases the need for jobs.