Credit
Cassidy Cichon
Section 1
Credit
The is the ability to borrow $$ in return for a promise of future payments aka “Buy Now…Pay Later”
What Determines if you can get credit and how much you can get
Credit Score
- Score between 300 & 850 (aka FICO score)
- The higher, the better
Credit Bureau
- Collects info on consumers’ credit like..
- Bounced a check
- Missed a rent payment
- Been sued
- Bankruptcy
Credit Report
- a negative record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy
Creditworthiness
- Your reliability to pay back a loan
Lenders
- judge this using 3 factors…
- Character
- Capacity
- Capital
Section 2
Vocabulary
To get credit you must demonstrate creditworthiness. Which is your reliability to pay back a loan. You do this because Lenders judge this using 3 factors character,capacity, and capital. Character is sense of financial responsibility, dependability, a steady job, and a long term residence. Capacity is financial ability to repay loan, have high enough income, and major expenses & debt. The last part is capital which is the value of what you own, savings, investments, and property. It is used to pay loan if needed.
Section 3
What is a Credit Card
Regular charge accounts
- Must pay balance in full
- Ex. American Express
Revolving charge accounts
- Can carry balance from month to mont
- Ex. Visa, Mastercard
Where can you use a credit card
You can use a credit card in many different places for pretty much anything.
as long as you know your credit limit
- Max amount you can spend using card
- Over limit = penalty fee or declined
- Approx $30 for each charge made beyond limit
Benifits and costs of using a credit card
Over-the-limit
- Going over credit limit
Late Fee
- Making payment late
Penalty Fees
- Additional fee due to late payment, over credit limit, returned payment, etc.
- Could also result in an increase in interest rate
Section 4
Ways to be safe while using a credit card
- Consider a loan as opposed to using a credit card
- Interest rate may be lower
• Pay credit card balance in full
- Avoid minimum payment trap
• Choose card wisely
- Least expensive; greatest benefits
• Other tips:
- Avoid too many cards, pay cash, don’t miss payments, read what you sign,
avoid identity theft, seek credit counseling if needed, beware of bankruptcy