The basics of credit

Nick Yaloff

Questions to answer

Section 1

  • What is credit: Credit is when get money to pay for goods and services, and then you pay that money back in the future.
  • What are the forms of credit: There are many forms credit, each changing your credit report and credit score.
  1. Non-revolving credit: Non-revolving lines of credit are also known as installment agreements. This type of account requires you to pay a fixed monthly amount.
  2. Revolving credit: Monthly payments on revolving lines of credit, such as credit and department store cards, fluctuate based on how much credit you have used and how much you choose to pay off each month.
  3. Secured credit: Secured credit refers to loans secured by an asset, such as your home or car. This type of credit is considered a safer risk on behalf of lenders.
  4. Unsecured credit: Unsecured credit, in contrast, does not involve putting down collateral to obtain financial resources. This type of debt typically refers to credit and retail cards.
  • What costs are associated with credit: Consumers use their credit cards to buy every day use items, clothes, food, and rent or mortgage for shelter. Remember that in the end, you still have to pay back the money you spent.
  • What determines if someone gets credit and how much they get: It mainly depends on the loaner, if they see you as trustworthy, and if you have a good interest, for new comes in the credit business, the lenders usually give you a small money cap, so that you can't spend more than that specific amount. If loaners think your creditworthy, they will give you a credit card.


Section 2

  • Credit report: Credit report is a factual record of your credit activities. It reports all your credit accounts and outstanding loans, the balances on your credit cards and loans, and your bill paying history. Every consumer has to have a credit report due to the laws and regulations.
  • Credit score: A credit score is a number that represents your calculated measure of credit risk. Your credit score is the result of a complex mathematical formula that takes into account numerous factors in your credit history. As a consumer, you always want to have a high credit score, having a low credit score can be caused by excessive purchasing and multiple credit cards.
  • Lender: Typically a bank or other business agency, lenders "lend" money to consumers in the hope that the consumers will pay them in the future.


Section 3

  • What is a credit card: In simple context, a credit card is a piece of plastic that you get from a lender, you swipe this to pay for an item instead of paying with cash, in the end though you have to pay your annual fee, if your late on your payment, you have to pay penalty fee's.
  • Where can you use credit cards: Now a days, you can use credit cards pretty much everywhere, grocery stores, gas stations, ATM's, clothing stores, and many other convenience stores.
  • Benefits and costs of using a credit card: With everything in this world, there are always pros and cons, the benefits of using a credit card is that you don't have to carry cash with you, your money is completely secured and insured, some of the cons like late fee's and over-the-limit fees balance it though.


Section 4

  • Tips to stay out of credit card debt
  1. Try to limit the money you put on the card cause don't forget you have to pay that money back in the future.
  2. Limit the amount of credit cards you have, it will give you a higher credit score, and you won't have to worry about some many credit cards.
  3. Keep up to date with your credit report, make sure everything checks in to prevent over charging and theft
  4. Don't be stupid when it comes to credit, pay your bills to ensure no penalty charges, and make sure to pay them on time.