CREDIT

A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.

CREDIT SCORE Your credit score is a numerical summary of the information contained in your credit report. Credit scores typically range from 300 to 850 with higher credit scores being better.

INTEREST Interest- fee charged by a lender to a borrower for the use of borrowed money.  usually expressed as an annual percentage of the principal (APR)  the rate is depends on the credit risk of the borrower, and the inflation rate.  Principal- the amount borrowed The lower the rate, the less you have to pay back on your borrowed money.

WHY DOES YOUR CREDIT SCORE MATTER? Credit checks are required for mortgage, auto and credit loan approvals. Employers may also run credit checks as part of the hiring or promotion process. Landlords will use credit reports to determine your ability to pay rent. If you have bad credit it is very difficult to live your life the way you want to.

TIPS FOR BUILDING GOOD CREDIT Disclosure- I am in NO WAY SHAPE OR FORM TELLING YOU TO OPEN UP A CREDIT CARD ACCOUNT AT 15/16/17/18 years old. Open a bank account and use it responsibly.  Avoid over-drafting your account = charging more than you actually have in your account. Most banks fine you $35. Open a secured credit card account.  Secured means that you have to put a deposit down in order to spend your money. Similar to a debit card but you can earn credit.

Only charge what you can PAY IN FULL.  Use it once a month for SMALL things. Try not to charge more than 30% of your limit. It hurts your credit score  Limit= the amount that the lender is willing to let you borrow Pay all of your bills on time, EVERYTIME.  Can significantly damage your credit Avoid opening too many accounts

Open a retail credit card, but be careful, they can have very high interest rates.  UNSECURED- retail card and all other CC cards are unsecured, meaning that they are trusting you to pay them back.  Maybe a store that you don’t shop at often would help you resist the temptation to max out your card. Check your credit score every 6 months to see where you are.

BE VERY CAREFUL WITH CREDIT CARDS. PEOPLE ARE MUCH MORE LIKELY TO SPEND MORE WHEN THEY ARE USING THEIR CC THAN WHEN THEY ARE USING CASH OR A DEBIT CARD. Also only paying the minimum payment on your card will result in horrible, terrible, awful unwanted interest and will take you forever to pay off your card and get out of debt. CNN Debt PlannerCNN Debt Planner