Buy Now Pay Later…

How to analyze the advantages & disadvantages of consumer credit

How to distinguish among various types of consumer credit

How to determine what creditors look for while lending money

How to maintain a good credit score

Bank lends you money (principle) in exchange for your promise to pay it back with interest. Interest - $ you pay to use credit APR - annual percentage rate: amount it costs

you a year to use credit (in % rate) It includes interest, fees and service charges.

Annual fee - yearly charge for the privilege of using credit. YUK!

Finance charge: dollar amount of using credit

Origination fee: charge for setting up a loan (mortgage)

Access to cash in case of emergency Ability to buy now Safety and convenience Bonus points or cash back Safer than a debit card for on line

purchases You need good credit to make purchases

Credit costs money $$$$$ APR Temptation to overspend May lose your good credit reputation if

you do not repay on time Too much credit can lower your FICO

score

Buy now pay later – Open Ended Credit – you are given a

certain limit (line of credit) Grace period: number of days which no

interest or finance charge will apply. Pay quickly!

Minimum Payment - 2% of your credit purchases - pay more than the minimum!

Installment Loans: Closed Ended Credit Payments on a regular basis Auto Loans Mortgages: Closed Ended Credit

15 - 30 yrs home loan interest rates are lower than installment & credit card rates

Credit history - record of your financial transactions

Payments, credit lines, income FICO scores: 500-850 Everything is linked to your social

security # Three major credit reporting agencies:

Exquifax, Experian and Trans Union Allowed 1 free credit report per year -

GET IT!

Unable to pay debt, you may file: Chapter 7 – erase debt & you may have to go

through some credit counseling Chapter 13 - you may pay back some of your

debt with more time. Reorganize Can only file once every 7 years Bad credit for up to 10 years! More than 1.5 people filed last year

Capacity – money coming in Character - history Capital - assets Collateral – cash Credit History - score These all affect your FICO score