Credit Basics

Some old stats 83% of college students have at least one credit card 45% of college students are in credit card debt –Average debt over $3000 The average household with debt carries approximately $10-12,000 and has 9 credit cards Americans shelled out more than $24 BILLION dollars in credit card fees in 2004

Cost of Credit APR - Annual Percentage Rate –Amount it costs you a year to sue credit, expressed as a percentage rate Annual Fee –Usually used by credit card companies Finance Charge –Actual dollar cost of using credit Origination Fee –A charge for setting up a loan

Credit Cards APR Annual Fee Grace Period Minimum payment Credit limit

Installment Loans Make payments in a regular basis usually for large purchases. –Car –Appliances –Interest rates usually lower than credit cards

Student Loans Usually carry lower interest rates Usually allow you to defer payments until after you graduate

Mortgages Home loan Usually years Large amount borrowed

Credit Report A record of your financial transactions –Loans you have applied for –Loan amounts you have received –Whether you pay your bills on time –For the past 7-10 years

Credit Reporting Agencies Equifax Experian Trans Union

C’s of Credit Capacity - ability to repay Character - paying on time Capital - have items of value

Bankruptcy Chapter 7 - erases most of debt –Unemployed/very low income –Counseling Chapter 13 - pay back debt but with more time –Court oversees payment plan WARNING - stays on credit report for 10 years and it becomes very difficult to get credit