1. Good Credit /Bad Credit
You Decide

2. Credit Basics
Credit: allows use of products or services in exchange for a promise to pay in the future.
Types of credit
1. Sales- put it on my tab
Installment Plan- washer/dryer purchase
Revolving Credit-Macey’s, Buckle, Lowes
Open-ended Credit- American Express
Credit Cards- Visa

3. 3. Service Credit- You use service and then pay later.
2. Cash- Personal Loans receive cash to pay bills
*Payment plan
*Lump sum
* Overdraft- checking account with credit limit
3. Service Credit- You use service and then pay later.
Utilities * Doctor * Hospital
Barber* Garbage pick-up * Cell-Phone

4. Advantages of Credit
Maintains healthy economy. Our economic system is built on credit and without the means of buying now and paying later the economy would collapse
Emergencies
Convenient
Permits purchase when prices are down
Enjoy item while paying for it
Establish Credit
Easier to exchange and return items
Detailed monthly bill

5. Disadvantage of Credit
Credit always cost money
Creates risk because you are spending your future income
Increases the cost of doing business
Encourages careless buying
Increases Over-buying
Increases family conflict

6. Interest- Cost of credit Collateral- Security on a loan
Title to a car
Deed to home or property
Cosigner- Second signer who will pay for the
loan if the first party defaults.
Default- Failure to repay the loan
Bankruptcy – Legally getting out of having to repaying debts. Damages credit for
7-10 years

7. Annual Percentage Rate (APR) - The cost of a loan over a full year expressed as a percentage.
Credit Rating - a rating based on how promptly a person pays his/her debts

8. Is Credit Good or Bad ?

9. I have a choice to make. . . . To Save To Buy on Credit
I could use it the whole time I’m paying on it.
It will cost more money to borrow.
It will tie up my money and I will lose buying power
When I borrow it creates a fixed expense each month.
To Save
I’d have to wait to use it.
It will take some time.
I would make a little interest
on my money while saving.
If there was an emergency I would have some money .
The cost of the item could increase while I am saving.

11. It depends on your financial Situation CAN YOU PAY IT BACK??
Is Credit Good or Bad ?
It depends on your financial Situation
CAN YOU PAY IT BACK??

12. Risk Control Management
Do you know the future? Death * Loss of Job * Health Emergency * Car Problems
Risk Control Management
*Savings
*Insurance
*Don’t over spend
Basic rule of thumb 20-25% of your take home pay

13. Mike and Kelsie were married and lived in Logan, Utah
Mike and Kelsie were married and lived in Logan, Utah. Kelsie worked full time while Mike finished up his degree. He had a part time job. They had saved a down payment and bought a small house close to the college. Their payment was $ each month.

14. After 3 years, Mike had finished school and was hired on by a local company. They decided to take out a loan to build a new home.

15. Their new house payment was $800 a month but they rented their previous small home for $700 dollars a month. Their house payment for the small home was $500 which paid the house payment on the rental plus added $200 towards their new home. Their house payment for their new home was $600 making their rent to only raise $100 dollars. Kelsie now could stay home with their new son.
$500 Old House Payment $700 Rent $200 Extra
$800 - $200 = $600 New House Payment

16. Clint and Jamie rented the small house for $700 a month
Clint and Jamie rented the small house for $700 a month. They had intended to be out of the house in 3 years but had twins instead, setting them back financially. They stayed for 7 years.
12 x 700= $8,400
8,400 X 7 = $58,800
House Paid in Full!
They could have owned something rather then paying rent to own nothing.

17. Bruce’s Garage Story
Bruce took out a loan to build his garage. It took five years for him to pay off the loan. He did have to pay interest but he was able to use the garage while he paid for it.
Ron saved for his garage for 5 years. He didn’t want to take out a loan. By the time he was ready to build, the cost of materials had increased faster than his savings. He ended up paying more for his garage and still had to take out a small loan to finish it.

18. Bruce and Sharon Home History
1964 Parents bought home $17,000 (paid for)
1975 We bought it for $30,000
1986 Sold it for $65,000 (still owed on it)
1986 Bought a home $75,000
2004 Sold house $215,000 (paid for)
2004 Bought new house $250,000
added our savings $45,000
(paid for)