Credit

What do you think?Nearly ___% of teens owe money to either a

person or company, with an average debt of $___.

About ____% of teens age 16-18 already have more than $1,000 in debt.

___% of teens say they understand how credit card interest and fees work.

___% of teens say they know how to establish good credit.

What is Credit?Credit means that someone will loan you

money in exchange for your promise to repay it, usually with interest.

Reminder: Interest is the amount you pay to use someone else’s money.

The money that someone is willing to loan you is called the Principle.

Types of CreditCredit Card

Installment Loan

Student Loan

Mortgage

Things to keep in mindAnnual Percentage Rate (APR)Annual FeesCredit LimitFinance ChargeOrigination FeeLoan TermGrace PeriodOver-the-limit fees and Late FeesRead the Small Print!

Credit: the goodConvenienceProtectionEmergenciesOpportunity to build CreditQuicker GratificationSpecial OffersBonuses

Credit: the BadINTEREST!!!

Overspending

Debt

Identity Theft

4 C’s of CreditCollateral

Capital

Capacity

Character

Credit ScoreA Credit Score is a number that reflects

your credit worthiness.

There are 3 agencies in which one can receive a credit report: Equifax, Experian, and TransUnion

Making your credit score go UPPay bills on time!

Make regular deposits into a savings account.

Minimize the number of Credit Cards.

Make small purchases and pay them off.

Bringing your score DOWNMaking late payments.

Bouncing Checks

Having too many Credit Cards

Maintaining high balances on your Credit Cards

Changing Credit Cards frequently

70-20-10 RuleGood way to keep Debt in check.Spend 70% of your income on living

expenses.Spend 20% in Savings.Use the Remaining 10% to pay off debt.

Living Exp. 70% Savings 20%Pay Off Debt 10%

How to avoid Credit ProblemsRead the fine print.Be choosy about your Credit Cards.Pay as much as you can every month.Pay your bills before they are due.Set up automatic payments if possible.Save, Save, Save.

BankruptcyChapter 7 – allows you to erase most of your

debt. To qualify, you typically must be unemployed or have a very low income. You must also undergo financial counseling as part of the process.

Chapter 13 – allows you to repay many of your debts over a period of time, usually no more than 5 years. A court typically oversees the repayment plan to make sure that you do.