Credit

Questions to Consider What is credit? Does credit cost? What are the advantages of using credit? What happens if I misuse credit?

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. Also refers to the borrowing capacity of an individual or company.

Credit Report NPR- Credit Reporters A credit report is a detailed report of an individual's credit history. Credit bureaus collect information and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants' credit worthiness.

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 annual percentage of the principal (APR) rate depends on the credit risk of the borrower, & the inflation rate. Principal- the amount borrowed The lower the rate, the less you have to pay back on your borrowed money.

Credit scores Low credit scores will cost individuals more money long-term. This table is based upon a thirty-year fixed mortgage rate on a $300,000 loan. FICO Score Interest Rate Monthly Payment 30 Year Amount 760 5.9% $1,787 $643,320 650 7.2% $2,047 $736,920 590 9.3% $2,500 $900,000

Interest $2,000 18% $50.00 62 months $1,077.25 $3,077.25 10% 49 months Amount charged to credit card APR Minimum Payment Time to pay off the credit card Total amount of interest paid Total paid for credit card balance $2,000 18% $50.00 62 months $1,077.25 $3,077.25 10% 49 months $443.00 $2,443.00 $75.00 35 months $573.00 $2,573.00

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. 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 Check your credit score every 6 months to see where you are. You are entitled to a free credit report from each of the credit bureaus once a year (Equifax, Experian, Transunion)

BE VERY CAREFUL WITH CREDIT CARDS 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 Planner

Safety tips Sign card with a signature and “Please See ID” Do not leave cards lying around Close unused accounts in writing and by phone, then cut up the card Do not give out account numbers unless making purchases Keep a list of all cards, account numbers, and phone lists separate from cards Report lost or stolen cards promptly