Hello Credit!!

By: Kelly Murphy

The Basics of Credit

Credit is the ability to borrow money in return for a promise of future payment. It is like you buy now, but pay later. There are many different types of credit: loans, credit card, house, car, and school. There is not a fee for credit but there is an annual percentage interest (APR) that you must pay. What determines if you can get interest is if you have creditworthiness. That means are you reliable to pay back a loan. A lender judge this by three things character, capacity, and capital. A credit report will show your past history and your past borrowing/repaying. They can tell by your credit score which shows them who qualifies for a loan, at what interest rate, and what credit limits. These credit scores will be reported to the credit bureau, to make them available to credit card companies. You can also get a personal loan by building integrity and its granted for personal use.

Vocab Watch

Character: sense of financial responsibility/ dependability.

Capacity: financial ability to repay a loan.

Capital: value of what you own.

Credit Cards: What you need to know

A credit card is a plastic card issued by a bank, business, etc,. for the purchase of goods or services on credit. You can use a credit card almost anywhere now a days. Credit cards have a annual fee, which is a required amount of money that you must pay. Along with that is interest (APR) you pay 0-29 percent; if you pay entire balance by due date then there is no interest! On every credit card there will be a card limit, which means the max amount you can spend on the card. If you exceed the limit you will have an over limit fee or it will be declined. You will receive a penalty fee if additional fee due to late payment, over credit limit, returned payment etc., this could also result in an increase interest rate. You will need to to control your credit costs, you can do this by considering a loan opposed to using a credit card. You should try paying credit card balance in full to avoid minimum payment trap. Pick a card wisely, least expensive but good benefits. Also avoid getting to many cards, pay cash, don't miss payments, and beware of bankruptcy. There is a lot of benefits of having credit cards: consumers can purchase more goods, the more the goods = more people to make the goods = more people have jobs, people with jobs are able to spend more money.

Smart Consumers: Don't fall into the credit card trap

You should try and start to build credit as soon as you turn eighteen. Establishing credit now will allow you to use the credit easily in the future. You should start small and get a store credit card, because that is easier to get approved. After that get a co-signer which is a promise to pay debts. Try and pay credit card balance in full. Avoid too many cards! Do not miss payments. Always read what you sign and seek credit counseling if needed.