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CREDIT

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by

michelle ashmore

on 9 September 2015

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Transcript of CREDIT

What is Credit?
another term for a loan ... buy now, pay later

*with a mortgage, college, car, or personal loan - you pay a fixed interest rate and rate is usually lower.

* with a credit card - you pay a variable interest rate (can change) and rate is usually higher.
How do you get credit?
credit worthiness: how likely you are to repay the money
Credit history / Credit Report
What's in your credit history or report?
Personal information -
- name, address, Social Security Number, date of birth, employers.

Credit history - (bulk of your credit report)
- date the account was opened
- amount of loan and balance
- history (have you paid on time)
- Closed or inactive accounts

Credit Report Inquiries - (when someone asks for credit report)
- remain on your credit report for up to two years.

Public records -
- any liens, bankruptcies, and overdue child support

THE GOOD AND BAD OF CREDIT
- convenient
- helps in emergency
- lets you pay little at a time
- safer than cash (if lost)
Credit Score
what is in a FICO credit score?
CREDIT
difference between credit card and debit card:
credit - borrow $ with promise to repay
debit - must have $ in checking account to use
The truth of running debit as credit

You can run a debit card as a credit card. Even though the transaction is logged as credit, you are still "authorizing a debit from your checking, not a credit card transaction."

Big difference between running a card as debit or credit is the time it takes the transaction to flow through to your account.

When a PIN is entered, the money is immediately deducted -- or debited -- from the account, whereas if credit is selected, the payment goes through the credit card network and the payment is withdrawn within a few days.

More fees to businesses -- it costs businesses up to twice as much money in interchange fees -- what they pay for every transaction -- when a transaction is run as credit versus debit.
- leads to debt (spend more than you have)
- impulsive buying
- increases total cost (interest)
- identity theft
how do I build credit?
Credit card companies (or banks for loans) look at:
job history
earnings
savings
current expenses (and other debts)
collateral (what can be taken if you don't pay)
*credit history (credit report)
Consider both positive and negative information in your credit report.

Late payments will lower your FICO Scores, but establishing or re-establishing a good track record of making payments on time will raise your score.
what is the credit score range?
- steady job

- pay bills on time

- have money in checking
and savings

- small limit credit card
1. Do you like the idea of having a credit card? Why or why not?

2. List some pros and cons of credit cards. List pros and cons of using cash. How do the lists compare? Discuss.

3. What would be some ways to use a credit card responsibly and avoid debt?

4. Do you like Crystal Paine's idea of using only cash? Would you do this? Why or why not?
Full transcript