What you need to know about credit

What is Credit?

Credit is a way to make big purchases possible. But don't be mistaken; it isn't free money. Everything you pay for with credit comes with interest, so you are actually paying more than what you would if you had cash.

Forms of Credit

Credit comes in many forms such as installment loans, student loans, car loans, pre-paid debit cards and more.

What Determines if Someone Gets Credit and How Much They Get?

The four c's determine most of it. The four c's are character, capacity, credit worthiness, and collateral. Character is if you are trustworthy or not, meaning do you pay back what you owe. Capacity is do you make enough money. Are you going to have enough money to pay back your dues? The next c is credit worthiness. What is your history? Do you pay back your fees on time? The last c is collateral. If you don't pay your fees, the bank will try to come take your valuables as collateral.

Words You Need to Know

● Credit- makes big purchases possible
● Credit Score- number based on your credit report (determines rates)
● Credit Bureau- a company that gathers credit information on individuals for a variety of reasons
● Credit Report- get to see balances, credit score, number to determine loans. (,, )
● Credit worthiness- history of payments
● Interest (APR)- yearly cost for the things you pay for (late = higher APR)
● Lender- an institution or individual who loans money to a borrower
● Credit Cards- good way to start establishing credit- ensures that you are able to get bigger loans later in life
● Personal Loans- a loan that establishes consumer credit that is granted for personal use

Questions to Answer

What is a credit card? A credit card is a tool to use instead of money. You still have to pay for your purchases, just not at that time.

Where can you use credit cards? You can use credit cards anywhere that accepts them, such are Wal-mart, Best Buy, and thousands of other places.

What are the benefits and costs of using a credit card? A benefit of having a credit card is establishing credit. Credit enables you to get loans and jobs. If you don't pay on time your credit starts to go bad, and you have to pay more for your purchases.

More Terms to Know

● Annual Fees- A yearly fee charged by credit grantors for the privilege of using a credit card
● Credit Limit- total amount of money you are allowed to borrow
● Interest Rate (APR)- yearly cost for the things you pay for ( late fees = higher APR)
● Penalty Fees- fees you pay if you are late paying your bill
● Over-the-limit fee- a charge you get for going over the limit on your credit card

Credit Card Tips

  • Don't buy something you can'y pay back in 25 days
  • Use a secure browser for internet purchases
  • Don't share your information with someone
  • Know what you are signing
  • Use your credit card for necessities
  • Pay on time