The Basics of Credit

Claudia Terrazas

All about credit:

What is credit?

Credit is what makes buying BIG purchases possible, but it is not free money. You have to make sure you are able to pay it back on time.

What are the forms of credit?
home loans, car loans, student loans, personal loans, credit cards, low limit credit cards, prepaid credit cards, student credit cards

What costs are associated with credit?
People who provide loans generally want to get some return for lending money, interest.

What determines if someone gets credit and how much they get?
4 C’s:
character- honest, truth worthy, checking/savings account. able to repay
capacity- being able to pay back
creditworthiness- how likely are you to pay it back
collateral- something of value they can take if you don't pay back

Words to Know:

Credit Score
numeric calculation based on info on your credit report. determines what your interest rate is and your loan

Credit Bureau

A company that collects the credit ratings of individuals and makes them available to credit card companies, financial institutions, etc

Credit Report
Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying

Considered suitable to receive credit, esp. because of being reliable in paying money back in the past.

Interest (APR)
annual percentage rate, cost for money that you borrow

An organization or person that lends money:

Credit Cards

Personal Loans

a loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity

Annual Fees
pay every year for using

Credit Limit
money allowed to borrow

Penalty Fees
late, over the limit, annual

Over-the-limit fee
charging too much

Credit Cards: What You Need to Know

● What is a credit card?
A plastic card issued by a bank, business, etc., for the purchase of goods or services on credit.

● Where can you use credit cards?
A credit card can be used wherever, but should only be used when they are really needed.

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

Using a credit cards invovles a lot of responsibilty. You must be able to pay the money you take, back. There are benefits though. Being able to pay for big, expensive things, like a first home.

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

  • read fine print
  • check credit report (,,,
  • always use secure browser
  • sign it, “use ID”
  • never share information
  • pay more than minimum balance
  • don't max out credit cards
  • use credit for necessities
  • keep track of what you charge
  • pay on time