Download Credit Basics

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
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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
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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