Card A. Risk 12/ Lance L. Lancer12/12 Credit: History, Types, Dangers Chapter 10

Card A. Risk 12/12 Credit: What is it? What is credit? What are the current uses of credit? Who can obtain credit? What are the dangers?

Card A. Risk 12/12 Confessions of a Shopaholic

Card A. Risk 12/12 Credit Discussion: Activity With a partner, discuss the following questions. How do people use credit? What are the positives and negatives of credit?

Card A. Risk 12/12 Credit Vs. Debit Credit Vs. Debit Credit Vs. Debit

Card A. Risk 12/12 Credit “Buy now, Pay later” Purchase Items at present time- pay for it in the future Purchase items that couldn’t be purchased otherwise

Card A. Risk 12/12 Types of Credit Open (Revolving) Closed (Installment) Service

Card A. Risk 12/12 Open Credit Revolving Amount is charged to account as often as desired (to a certain dollar amount). Payments are made each month Ongoing balance can be maintained Minimum monthly payment required Ex: Credit Cards

Card A. Risk 12/12 Closed Credit Installment Amount is set for purchase Payments are made and balance is paid off in a certain amount of time Ex: Store accounts (furniture/appliances) Car loans, mortgages

Card A. Risk 12/12 Service Receive service, pay for them later Utilities Ex: Electricity, water, sewer, etc. Odd Ex: Doctor or dentist Receiving service and paying later

Card A. Risk 12/12 Activity 2: How Open Credit Works CC Balance $2,000 CC Annual Percentage Rate 11.25% Monthly Payment How many months will it take to pay off? Money you paid just in interest $20 $30 $100 $150 $200 Credit Card Calculator: Credit Payoff Calculator Credit Payoff CalculatorCredit Payoff Calculator

Card A. Risk 12/12 Types of Credit: Activity Enrique is thinking about buying an Ipad. He will need to borrow money to make the purchase. He can arrange the financing ahead of time, or he can use the installment sales plan at the store.

Card A. Risk 12/12 Activity Continued Enrique is thinking about buying an Ipad. He will need to borrow money to make the purchase. He can arrange the financing ahead of time, or he can use the installment sales plan at the store. 1.What are the advantages/disadvantages of borrowing money ahead of time? 2.What are the advantages/disadvantages to the installment plan? 3.What type of credit is the installment plan an example of?

Card A. Risk 12/12 3 C’s of Credit Credit Worthiness Measure of your reliability to repay a loan. A lender judge creditworthiness based on 3 factors: A lender judge creditworthiness based on 3 factors:CharacterCapacityCapital

Card A. Risk 12/12 Character Will you repay debt? Credit history- Do you have a history of paying back debt? Capacity Can you repay debt? Do you have the Income to pay? 3 C’s Of Credit

Card A. Risk 12/12 Capital Is the creditor (lender) fully protected if you fail to repay? Assets (own)- Liabilities (owe)= payment of debt

Card A. Risk 12/12 Credit History A record of your past borrowing and repayments. If you paid your bills on time in the past, lenders will be more likely to lend you money in the future.

Card A. Risk 12/12 What assets back up your promises to pay? CarHouseJewelry You can sell collateral to pay off debt Collateral

Card A. Risk 12/12 Cosign A parent or older person will sign the loan with you. By them signing the loan, they are agreeing to pay if you are unable to. ** Usually this is a way younger people can get loans. The lender will feel safe in lending you the money.

Card A. Risk 12/12 Credit Application - Activity Examine the sample credit application Please put false information in the application, do not write in your SSN! What information do they want from you? Why do you think they need this?

Card A. Risk 12/12 Requirements What is needed in order to open a credit card? Credit Card Requirements Credit Card Requirements

Card A. Risk 12/12 Credit Card Debt Credit Debt- A Students Story Credit Debt- A Students Story

Card A. Risk 12/12 Credit Rating A measure of your creditworthiness. A judgment about whether or not you have the ability and willingness to pay your bills on time. Lenders will decide to give you a loan usually based on your FICO Score

Card A. Risk 12/12 FICO Score Computerized scoring system. Score will be between 300 and 850, with 850 being the highest. The score is based on the following: Payment history, current debt, length of credit history, new accounts and inquiries, and types of credit used.

Card A. Risk 12/12 How do you establish credit? Open a checking and savings account Get a small loan in your name (auto loan) Open up a credit card with a small balance ($500). Use it for gas and pay it off on time every month! Maintain a low balance on credit cards and pay it off every month! DO NOT BOUNCE CHECKS!

Card A. Risk 12/12 3 Credit Bureau's ExperianEquifax Trans Union

Card A. Risk 12/12 What determine my credit score? Payment History 35% Amounts Owed30% Length of Credit History15% Types of Credit in Use10% New Credit10% Other Factors How long at current residence How long on current job

Card A. Risk 12/12 Grace Period The time between the billing date and the payments due date when NO interest is charged. For most credit cards, the grace period is 15 days. If you do not pay your bill within the grace period time frame, interest will be charged.

Card A. Risk 12/12 Credit Limit Maximum amount you are allowed to charge. If you go over your limit, you will have to pay a penalty that can be as much as $30 or more for each charge made beyond your limit. NEVER EXCEED YOUR LIMIT! You should never have more than half of your limit charged on your credit card! This decreases your credit score.

Card A. Risk 12/12 Finance Charge Total cost a borrower must pay for a loan, including all interest and fees. Annual Percentage Rate (APR) The finance charge calculated as a percentage of the amount borrowed.

Card A. Risk 12/12 What can hurt your credit score? Bouncing checks Not making payment on time Having too many credit cards Having a high balance (over 50% of your credit limit).

Card A. Risk 12/12 Dangers Overspending Identity Theft High Interest Rates Ruining Credit Record Tying up Future Income

Card A. Risk 12/12 Identity Theft Involves using someone else’s identity to get cash or buy products using credit cards, or to access financial accounts that belong to the victim. 60 Minutes Identity Theft 60 Minutes Identity Theft ATM Scam ATM Scam Children's Identity Stolen Children's Identity Stolen

Card A. Risk 12/12 How do they become you? All criminals need your social security number, your driver’s license, or even your credit card number to open charge accounts in your name. They don’t even have to give a real address, a P.O. Box will work!

Card A. Risk 12/12 How to Protect Yourself? Guard personal documents NEVER give out your SSN to ANYONE unless absolutely necessary Keep personal documents in a safe place Keep track of your bills and what you are spending

Card A. Risk 12/12 What to do if your identity is stolen Report the theft to the three major credit bureaus. They will put a fraud alert on your account. Report theft to law enforcement Contact your bank or other organizations you have credit accounts with Call the FTC