1 / 25

How to Get and Keep Credit

Penalty fees for late or missed payments, over the credit limit ... Credit limit: the maximum amount a card holder can charge on a credit card ...

Kelvin_Ajay
Download Presentation

How to Get and Keep Credit

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


    Slide 1:How to Get and Keep Credit

    Chapter 26.1

    Slide 2:Applying for Credit

    Why do you need a credit history? To prove you can handle credit responsibly

    Slide 3:Developing a Credit History

    Apply for credit Be approved for it Use it Make payments to the creditor

    Slide 4:Selecting a Credit Card

    Interest rate Extra fees Will interest rate change (introductory or not) Cosigner needed Is there a grace period?

    Slide 5:Selecting a Credit Card: Cost of Credit

    Interest rates: annual percentage rate (APR): cost of credit on a yearly basis Find out if it is an introductory rate or not Fees: Different fees for different services Cash advance: loan given in cash by a credit card company Penalty fees for late or missed payments, over the credit limit

    Slide 6:Selecting a Credit Card: Other Considerations

    Cosigner: someone who agrees to be responsible for a debt if the main applicant does not repay it Grace period: amount of time allowed to repay a debt WITHOUT having to pay interest charges

    Slide 7:Applying for a Credit Card

    Application Address, Employment, Income, Bank information, Other credit

    Slide 8:How old must you be to apply for this credit card? How do your choices influence your economic situation?

    Slide 9:Applying for Credit Creditworthiness: The Three C’s

    Capacity: applicant’s ability to repay the loan Verify employment, income Lots of debt already? Not as creditworthy

    Slide 10:Applying for Credit Creditworthiness: The Three C’s

    Character: shows if proven to trustworthy in repaying debts Credit references Check credit bureaus: businesses that provide information about consumers’ creditworthiness to companies or banks Personal/professional references Criminal record?

    Slide 11:Applying for Credit Creditworthiness: The Three C’s

    Capital: amount of money the applicant has beyond his or her debts Savings and investments Capital to be used as collateral

    Slide 12:Applying for Credit Credit Limits

    Credit limit: the maximum amount a card holder can charge on a credit card Limit increases as card holders pay off cards MAJOR penalties for going over or consistently being close to “maxing out” the card

    Slide 13:Applying for Credit Making the Minimum Payment

    Minimum payment: smallest amount to be paid each month Most cards: 2.5% of balance is minimum amount due Example next slide

    Slide 14:MONTH 1 $1,000 balance on a credit card with 18% interest Divide 18% into 12 months: 1.5% interest each month Minimum payment 2.5% of balance First month: $1000 x 2.5% = $25 is minimum payment However, 1.5% interest each month means only $10 of the $25 payment is applied to the balance, the remaining $15 is for interest / finance charge

    Slide 15: MONTH 2 $990 balance on credit card Divide 18% into 12 months: 1.5% interest each month Minimum payment 2.5% of balance $990 x 2.5% = $24.75 However, 1.5% interest each month means only $9.90 of the $24.75 payment is applied to the balance, the remaining $14.85 is for interest / finance charge

    Slide 16:Maintaining Credit

    Chapter 26.2

    Slide 17:Understanding Loans and Mortgages

    Many principles of using a credit card applies to other types of credit Similar with a few differences

    Slide 18:Understanding Loans and Mortgages How Installment Loans and Mortgages Work

    Loan: money lent by one party to another at interest Most require collateral & paid in installments Cars: 3-7 years Mortgage: loan agreement secured by property Homes: 15, 20, 30, 40 years

    Slide 19:Understanding Loans and Mortgages How Installment Loans and Mortgages Work

    Variable rate: interest rate that fluctuates or changes over the life of the loan Fixed rate: interest rate ALWAYS remains the same Down payment: portion of the total cost paid when item is purchased

    Slide 20:Understanding Loans and Mortgages How Installment Loans and Mortgages Work

    Principal: amount of borrowed money still owed and on which interest is based Simple interest loan: interest is based on the original principal alone Compounding interest loan: interest is also paid on added interest amount Finance charge: total amount it costs borrower to have the lender finance the loan Includes interest, application fee, etc.

    Slide 21:Understanding Loans and Mortgages Secured & Unsecured Loans

    Secured loan: loan backed by collateral Unsecured loan: loan NOT backed by collateral Higher risk = higher interest rate Mortgages = secured Credit card debt = unsecured What’s a car loan?

    Slide 22:Keeping a Healthy Credit Record

    Maintain good credit rating Pay bills on time Low credit rating = higher interest rate More restrictions

    Slide 24:Keeping a Healthy Credit Report Staying within your Income Limmits

    Experts suggest: no more than ______% of your income should be spent on credit payments 20

    Slide 25:Signs of Credit Trouble

    Cannot make monthly payments Receiving multiple payment due notices Calls from bill collectors Wages are garnished Garnishment of wages: Court order to take part of a debtor’s paycheck for payments Item is repossessed: creditor takes the item back

More Related