Charle Pethsomvong

Basics of Credit

Credit gives you the ability to buy something then pay for it later. Credit is not completely free because you must pay interest or annual percent rate. Interest is money that must be paid along with the money you owe. If you pay the entire balance by the due date there will be no interest. Forms of credit include credit cards and loans. A person's creditworthiness determines if he/she gets credit and how much. Creditworthiness is judged based on character, capacity, and capital. The credit bureau keeps a record of very adult. The credit bureau assign a credit a rating which reflects your creditworthiness. Your credit rating is also known as your credit score. The higher the score the better. It is a score between 300 and 860. Ways to improves good scares are to have on time payments, low debt, long history, and limited number of credit cards. Your credit history or credit report contains credit information and credit score. Common credit cards include Visa, Mastercard, and Discover. With regular charge accounts you must pay balance in full. With revolving charge accounts you can carry the balance from month to month. Personal Loans establish consumer credit for personal use. A lender is someone who gives out money. They are also known as creditors.

Vocabulary Watch

Credit is the ability to buy something and pay for it later. Your credit score is important because it determines how much credit you can have. Your credit score is a representation of how reliable you are to pay back the money. Interest is something you want to be wary of. Try to avoid paying interest by making sure all payments are on time.

Credit Cards

Common credit cards include VISA, MasterCard, Discover, and AMEX. Credit cards come with an annual fee. An annual fee is money that needs to be paid every year. To avoid paying interest when using credit cards make sure to have your entire payment paid on time. Credit cards have limits. The credit limit is the maximum amount that can be bought with a credit card. Penalty fees come from late payments and going over the limit. The fee from going over the limit is known as the over the limit fee. There are regular charge accounts and revolving charge accounts. Regular charge accounts require the balance must be paid in full. Revolving charge accounts allow the balance to carry from month to month.

Don't Fall into the Credit Card Trap

Try to keep the number of credit cards you have low. Having multiple credit cards hurts your credit score. Ideally you would want to only have one credit card. When using a credit card when you are young try to think about the future. Keep in mind that if you buy something and know you will be unable to pay it back on time, that will hurt your credit score. Your credit score will be very important when you try to get loans for big purchases like a car or house. Also when paying your credit card bill try to pay off the entire amount instead of just the minimum balance. There is no punishment for only paying the minimum balance except your next payment will have interest. TO avoid that interest pay the full bill. Be careful for penalty fees. Know your credit card's limit and be sure to never go over the limit. Make sure all your payments are on time as well.