Credit Newsletter

By: Evelyn Castro

The Basics of Credit

Credit is the ability to borrow money for a promise of future payment. There are two main types of credit loans which are like credit cards and then theirs House which are like car and school payments. The House credit is typically the long term credit. Credit is not free you must pay interest. To get credit you must demonstrate your creditworthiness. Creditworthiness is your ability to pay back a loan. Lenders judge your creditworthiness by using 3 factors: Capital, Capacity, and Character.

Vocabulary Watch

Words You Need To Look Out For

Credit Bureau- collects info on consumers credits and sells it

Credit Rating- it is also known as your credit score and it is a number that reflects your ability and creditworthiness

Credit Report- also known as credit history and it is a document with information on your credit and it also includes your credit score. It is provided by the Credit Bureau

Credit Cards: What You Need to Know

A credit card is a small plastic card issued by a bank or business and it allows the holder to purchase goods or services on credit. You can basically use a credit card anywhere businesses allow it. Credit is not free you must pay interest (APR or annual % rate) . Interest Rates are usually between 0% and 29%. If you pay entire balance by due date than you don't get charged interest. There is a required annual fee you must pay that is usually between $15- $100. There is usually a maximum amount of money you can spend using a credit card. If you spend over the limit of the maximum amount you can get a fee of $30 for each charge made beyond limit.

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

Smart Tips when Using A Credit card:

  • Choose card wisely - least expensive card gives you better benefits
  • Pay credit card balance in full- avoid minimum payment trap
  • Avoid too many cards
  • Don't miss payments
  • Read what you sign
  • Avoid Identity theft
  • Seek credit counseling if needed
  • Beware of bankruptcy