CREDIT

QUESTIONS WE WILL ANSWER…

• What is credit?• What does it cost to use credit?• What are the advantages of using credit?• Where can you get credit?• What questions should you ask yourself before

you use credit?• What happens if you misuse credit?

WHAT IS CREDIT?

When you get a good or service before you pay.

With the promise that you will pay it back.

WHAT IS INTEREST?

The cost of barrowing money

APR

Annual Percentage Rate

The amount of money it costs you each year to use credit.

OTHER FEE/ CHARGES…• Annual Fee• Yearly charge for the privilege of using credit

• Finance Charge• The actual dollar cost of using credit

• Origination Fee• Charge for setting up the loan (houses)

• Grace Period• Number of days where there is no fees

• Minimum Payment• The amount that you have to pay (2%)

WHAT IS THE LOAN TERM?

This is the length of the loan

LOAN LENGTH MATTERS…

PRINCIPLE X RATE X TIME

=

Total you will pay back

LETS CALCULATE…

If you buy your dream house for 100,000 at 10% for a 30 year term.

$100,000 X .10 X 30 =

$300,000

ARE THERE BENEFITS TO CREDIT?

• Emergencies• Your car breaks down… - Your water heater

dies…

• Buying something now• You can have the house now - the car now…

• Safe• Wont have large amounts of cash on you

• Bonus/ Points/ Rewards• Get something back for your money

WHERE YOU CAN GET CREDIT…

SHOULD YOU GET ANY CREDIT CARD?

No - Shop Around!!!

All cards have different options

(fees, requirements, rewards, uses, etc.)

HOW TO SHOP FOR THE BEST CREDIT CARD

• Compare at least three cards• Ask your parents• Look at things like…• APR• Annual Fee• Grace Period• Minimum Payment• Credit Limit• Other Fees

WHAT IS A CREDIT REPORT?

• It’s a report of your credit history• It shows your personal financial transactions• Also, shows loans that you have applied for,

gotten, paid back• Also, shows if you pay bills on time, or not at all

• Its scale runs from 300 (low) to 850 (high)• Majority of people have scores between 600

and 800• A score of 720+ will get you the most favorable

interest rates

WHAT CAN HAPPEN IF YOU DEFAULT ON YOUR LOAN?

1. Need to File Bankruptcya) This is a legal processb) Stays with you for 10 years

2. May Face Legal Charges3. They come and repossess their property4. Place a lien on your possessions/property

a) Will not be able to sell your ______ without paying