Credit

By: Przemek Gradzki

What is Credit?

Credit is your reputation as a borrower. Your creditworthiness tells lenders how likely you are to repay your loans. Your Credit Score is made up from information about your borrowing history. Most of the information comes from the Credit Bureau and shows up on your credit report.

Forms of Credit

Credit can be in a form of a Credit Card or a Personal Loan. When you use your credit card you will be charged Interest (APR) unless you pay your balance in full. To be able to build your credit score you must be charged Interest. Other costs that come with credit are annual fees. Some credit cards have no annual fees which is a positive.

How to get Credit?

To be able to receive credit you need a good credit score. This also depends on your income. Credit score ranges from 300 to 850. Having a high credit score would give you the advantage of having a lower interest. A lower credit score would cause you to have a higher interest.

Vocabulary

Credit Card :

  • Allows consumers to purchase goods and services against their line of credit and pay for them later. A student credit card gives consumers the option to pay the outstanding balance each month or to pay over time.

Annual Fee :

  • Yearly cost of owning a credit card. Many credit card companies offer cards with no annual fee.

Interest Rate :

  • The rate a lender charges for use of its funds.

ATM:

  • Automated Teller Machine through which you can access your checking or savings account with your ATM, debit, credit or check card.

Credit Line :

  • Also known as credit limit, this is the maximum amount that you can charge on your credit card.

Credit Cards

A credit card is a plastic card that is issued by a bank for the purchase of goods or services on credit.


You are able to use a credit card almost anywhere. You just need to make sure that your type of credit card is accepted (Visa, Master Card).


There are some benefits of using a credit card. First of all you can buy now and pay later. No need to carry cash. You build your credit history. Possibly of earning rewards. There is a Credit Limit so you don't go over your allowed limit.


While there are benefits there also are Penalty fees for using a credit card. Some credit cards can have Annual Fees. Credit cards charge an Interest Rate (APR) for using the lenders money. Some credit cards also have Over-the-limit fees. When you go over your credit limit you are charged a fee.

Credit Card Traps

Read the fine print.

  • Important information is provided in the fine print. Not knowing about it can hurt you later.
Minimum Payment

  • If you pay the minimum payment every month you may be on the hook for a very long time.
Penalty Interest Rates

  • Late payments can raise your interest rate from 7% to 27%!


Monitor your credit card and bank accounts online at least once a week to watch for unauthorized charges.

When shopping online shop only from protected and verified vendors.