Credit
by: Gino Rivera p.7/8
Credit
Credit is not free!
you must pay interest (APR or annual % rate)
Creditworthiness
'your reliability to pay back a loan
lenders judge this using 3 factors
'character' sense of financial responsibility dependability steady job. residence (long term)
'capacity' financial ability to repay loan. high enough income. major expenses and debt.
'capital' value of what you own. saving investments property. use capital to pay loan if needed
credit bureau
'bounced a check?
'missed a rent payment?
'been sued?
'bankruptcy?
assigns credit rating(score)
number that reflects your creditworthiness
do you have the ability and willingness to pay your bills on time.
credit rating
'the higher, the better
effects on score
'on time payments = good score
'low debt = good
'long history = good
' limited # of credit cards = good
credit hitory
'credit information
'credit score
Who?
'provided by credit bureaus
'requested by lenders
when?
'apply for credit
'once a year for free; otherwise pay small fee
'suspect identity theft
credit cards basics
incentives: cash back< points, Airline miles
regular charge accounts
'must pay balance in full
'EX. american express
revolving charge accounts
'can carry balance from month to month
EX VISA mastercard
Establish credit
start small
'store credit card
-easier to get approved
'cosigner
-promises to pay debts
preferred cards do not count
credit card costs
'required annual $ amount you must pay
'15 - $100
interest (APR)
'0% to 29%
'pay entire balance by due date = no interest
credit limits
'max amount you can spend using card
'over limit = penalty fee or declined
'approx $30 for each charge made beyond limit
credit card fees
'going over credit limit
late fee
'making payment late
penalty fees
'additional fee due to late payment over credit limit returned payment
'could also result in an increase in interest rate
control credit card costs
interest rate may be lower
pay credit card balance in full
'avoid minimum payment trap
choose card wisely
'least expensive greatest benfits
other tips
'avoid too many card pay cash dont miss payments read what you sign avoid identity theft, seek credit counseling if needed beware of bankruptcy
impact on the economy(positive)
more goods= more people to make goods = more jobs
people w/jobs are able to spend more money
use credit to purchase even more goods
impact on the economy(negative)
fall into heavy debt
can no longer purchase goods must pay debt
decrease need for jobs
no job = less spending
less spending= lower demand for goods = job cuts