1. Getting and Keeping Good Credit
Learning Target: I understand how my actions can directly affect my credit report and the importance of maintaining good credit.

2. Credit 101
Credit allows borrowers to purchase items that they otherwise could not afford at the time.
What is Credit? It’s an agreement to obtain money, goods or services now in exchange for a promise to pay in the future.

3. Credit 101 A creditor lends money or provides credit.
A debtor borrows money or uses credit.
Whether or not to give Credit and the amount of Credit is based on the creditor’s confidence that the debtor can and will repay the debt.

4. Credit 101
A local business owner has to decide if the customer is worth the risk to let him/her charge items and pay at the end of the month.
Credit Card Companies such as Visa, Mastercard, Discover will charge 13% to 23% interest on unpaid balances.

5. Interest Rates
APR or Annual Percentage Rate is the cost of credit on a yearly basis.
Example: $100 loan X 18% APR = $18 a year or $1.50 a month.
BE AWARE of low introductory APRs that increase after a certain period of time or if a late payment is received.
“No Interest for 6 months” and then the interest is very high.

6. Credit Card Interest For example: If your Visa (16%) balance is $500
You only pay the minimum payment of $25
Your new balance would be…..
$ (interest) = $481.33
Where did $6.33 come from? 16% /12 months = 1.33% per month
$475 *1.33% = $6.33

7. Credit Card Interest Now you try…..
You have a MasterCard and the interest rate is 20%. Your balance is $ You pay $ this month. If you didn’t charge any more during the month, what would be your balance?
$1500 – 450 = $1050
Interest amount? = 1050 * 1.66% = $17.43
Balance = $ = $

8. Credit Cards Advantages of Credit Cards Disadvantages Credit cards
Convenience
Helps to establish a credit rating or measure of a person’s ability and willingness to pay debts on time
Disadvantages Credit cards
Easy to misuse
Items cost more to purchase because of interest
Commits future income

9. Sources of Credit
Store Charge Accounts – credit provided by a store or company for customers to buy it products.
Example: Old Navy, Best Buy, & Dicks Sporting Goods
Best Buy is 25.99%
Credit Cards – usually issued by banks or major credit companies like VISA, MasterCard, & America Express.
These cards can be used anywhere and usually have annual fees.

10. Sources of Credit Banks and Credit Unions offer many types of loans.
Banks often require collateral or something of value to secure the loan.
Payday lending businesses and pawnshops can also offer a loans, but usually at high interest rates. (Means if you need money on Wednesday – you get it, BUT you must pay it back as soon as you get paid)

11. Getting and Keeping Credit
To develop a credit history, you will need to apply for credit, be approved for it, use it, and then make payments to the creditor.
You have to be 18 to start building credit.
Credit Cards and Car Loans help build your credit.
Debit Cards do NOT help build your credit.

12. Selecting a Credit Card
Some things to consider…
What is the interest rate?
Will I be charged extra fees?
Will the interest rate change?
Will I need a co-signer?
Will I have a grace period or period of time to repay before interest is charged?

13. Credit Score Beacon Score – scores range 450-850 Average score is 680
Inquiries – show who and how many times your report is pulled to look at your credit
Usually unpaid credit cards and loans
1 free credit report per year

14. Factors that Affect Your Credit Score

15. Signs of Credit Trouble
Cannot make minimum monthly payments
Late payment notices
Calls of bill collectors
Wages are garnished
Repo man visits