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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 15-30 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