Build Your Credit!

Selena Saucedo

The Basics of Credit

● What is credit?

Credit is the ability to borrow money in return for a promise of future payment; however, credit is not free. You have to pay the money back later and the longer you wait, the more interest builds meaning you'll end up paying more in the long run.

● What are the forms of credit?

Personal Loans such as car loans, home loans, school loans, loans for appliances, and credit cards.

● What costs are associated with credit?

Costs associated with credit are payments that you owe to the lender or if you don't make your payments, your credit score can also suffer.

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

The 3 C's of creditworthiness (Capital, Capacity, and Character), as well as what the Credit Bureau gives you on your Credit Report help to determine whether or not one will get credit.

What You NEED to Know

Questions to answer:

● What is a credit card?

A credit card is a little plastic card that you can use to buy or make payments. Credits cards usually come with a credit limit and once you hit that credit limit, you can no longer spend any money on your card. Some carriers, like American Express, are regular charge accounts where you have to pay back your total in full; others, such as Visa and Master Card, have roll over accounts where you're only required to pay a minimum amount of your money due in order to keep using your card.

● Where can you use credit cards?

You can use credit cards almost anywhere, such as fast food restaurants, stores, and salons.

● What are the benefits and costs of using credit cards?

Some benefits of using credit cards, are that you can buy something that you don't have the money for at the moment but know you will have the money for in the next 25 days.

Some costs of using a credit card is that it can either make or break your credit. Penalty Fees can added on for just about anything; for example, late payment, over credit limit, returned payment. There is an Annual Fee that needs to be paid, you can either pay in full or pay the minimum balance and let your interest rate take effect or pay it all in full and owe no interest rate. There is also and over the limit fee that you have to pay if you spend all of your credit card limit and still try to use more.

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

I highly suggest that you have only one credit card, that way it's not hard to keep track of where your money is being sent and you won't end up missing payments. You should get a credit card as soon as you turn 18 so that you can start building credit to buy something in the future.

If you have a payment for your credit card and you have enough money to pay the bank back in full, you should do that. It will make your credit score go higher and you'll have less money to pay in the long run because there would be no interest on your money.

When someone tells you to fill out a credit card application in order to get free gear, DON'T DO IT. The more credit cards you have, the more likely you are to lower your credit score. Simply tell them 'no thank you' and keep walking.