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Unit 9: Financial, Economic, and Business Technology Competency 3: Select strategies to use in handling credit and managing debt.
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What is Credit? Credit is the privilege of borrowing money with the promise to pay it back later.
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What is Credit? Your first venture into a loan will most likely be through a credit card. Using a credit card is really taking out a loan. Credit-card companies and banks that issue credit cards are letting you borrow their money when you use their cards.
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Credit History Credit history is a complete record of your credit performance. Building a credit history takes time and patience. Something as simple as keeping a cell phone bill paid on time builds credit history.
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Credit Records Before you are granted credit, a creditor (whoever will grant you credit) will ask about your past credit performance. Were your bills paid on time? How much total credit did you receive?
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Your Credit File Everyone who uses credit has a credit file. A credit bureau is a company that maintains credit files.
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Credit Bureau There are three major credit bureaus: Equifax Experion TransUnion
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Credit Report A credit report is issued by a credit bureau and contains relevant information about a person’s credit history. About all of your public information goes on your credit report. Personal information Current and previous employers Failing to pay bills Filing for bankruptcy
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Advantages of Credit Credit can provide emergency funds. Builds a good credit history (if used responsibly). A safe alternative to cash. Gives you time to pay.
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Disadvantages of Credit Credit purchases may cost more than cash purchases. (finance charges). Future income is tied up when credit is used. Car payments House payments Buying on credit can lead to overspending.
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Kinds of Credit Open-Ended Credit (limit placed on amount borrowed) Closed-End Credit (loan repaid in fixed payments) Service Credit (service done and paid for later) Layaway Plans (regular payments made on merchandise held in your name)
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Getting Credit Started Open a savings account Open a checking account Use Parents to get started May need parents to co-sign Get a small loan Apply for a bank credit card
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