Credit.

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Presentation transcript:

Credit

What do you think? Nearly ___% of teens owe money to either a person or company, with an average debt of $___. About ____% of teens age 16-18 already have more than $1,000 in debt. ___% of teens say they understand how credit card interest and fees work. ___% of teens say they know how to establish good credit.

What is Credit? Credit means that someone will loan you money in exchange for your promise to repay it, usually with interest. Reminder: Interest is the amount you pay to use someone else’s money. The money that someone is willing to loan you is called the Principle.

Types of Credit Credit Card Installment Loan Student Loan Mortgage

Things to keep in mind Annual Percentage Rate (APR) Annual Fees Credit Limit Finance Charge Origination Fee Loan Term Grace Period Over-the-limit fees and Late Fees Read the Small Print!

Credit: the good Convenience Protection Emergencies Opportunity to build Credit Quicker Gratification Special Offers Bonuses

Credit: the Bad INTEREST!!! Overspending Debt Identity Theft

4 C’s of Credit Collateral Capital Capacity Character

Credit Score A Credit Score is a number that reflects your credit worthiness. There are 3 agencies in which one can receive a credit report: Equifax, Experian, and TransUnion

Making your credit score go UP Pay bills on time! Make regular deposits into a savings account. Minimize the number of Credit Cards. Make small purchases and pay them off.

Bringing your score DOWN Making late payments. Bouncing Checks Having too many Credit Cards Maintaining high balances on your Credit Cards Changing Credit Cards frequently

70-20-10 Rule Good way to keep Debt in check. Spend 70% of your income on living expenses. Spend 20% in Savings. Use the Remaining 10% to pay off debt.

How to avoid Credit Problems Read the fine print. Be choosy about your Credit Cards. Pay as much as you can every month. Pay your bills before they are due. Set up automatic payments if possible. Save, Save, Save.

Bankruptcy Chapter 7 – allows you to erase most of your debt. To qualify, you typically must be unemployed or have a very low income. You must also undergo financial counseling as part of the process. Chapter 13 – allows you to repay many of your debts over a period of time, usually no more than 5 years. A court typically oversees the repayment plan to make sure that you do.