EverFi Unit 5: Credit and Debt
credit score
A rating (number) used by credit reporting companies to help lenders (banks) decide whether and/or how much to loan a borrower (You must manage your debt wisely to increase and keep this rating high!)
pre approval
The process of obtaining a car or home loan from your bank or credit union for a specific amount ahead of time
car dealership
a company that sells cars and helps customers get car loans (usually at higher interest than banks)
secured loan
a loan backed by collateral (something valuable such as a car, home, boat, etc.) - usually have a lower interest rate - less risky for the financial institution
financial advisor
a person who is an expert at handling money and can give you information and advice about saving and investing
penalty rate
a very HIGH INTEREST rate charged by the credit card company when a borrower violates the card's terms and conditions or makes LATE payments
annual fee
a yearly fee that is charged by the credit card company for the convenience of using the credit card
loan
borrowed money you must repay with interest (usually used to make a large purchase like a house, car, college)
financial institution
businesses that provide banking services to consumers and businesses
identity theft
private information is stolen and used for criminal activity or to impersonate someone
credit card balance
the amount of money owed to the credit card company
credit history
the complete record of your borrowing and repayment performance (how much and whether you paid on time)
minimum balance
the lowest amount that has to be paid on a credit card for a particular month (When paying the lowest amount, the borrower ends up paying more interest because of the large remaining balance.)
credit limit
the maximum amount that you may charge or borrow on your credit card
APR (Annual Percentage Rate)
the yearly percent of interest that you pay for borrowing money (can be different for each credit card or loan)
What should you do if you are behind in loan payments?
- Ask if you can pay a little now and pay the rest after your next pay day. - Borrow money from friends and family to pay. - Ask if you can defer the loan (pay later) but you'll have to pay the interest.
How can you protect your identity?
- Regularly monitor your credit report. - Contact lenders and credit bureaus to address incorrect information. - Place a credit freeze with the credit bureaus if you suspect a problem
Why use a credit card?
- You can build your credit history by paying it off on time (This will help you get a loan later). - You can get rewards and discounts. - You can buy something you need now and pay for it after pay day.
What are benefits of paying the full balance of a credit card every month?
- You won't have to pay interest. - You won't have to pay any late fees. - Your credit score can increase.
What are benefits of having a good credit score?
- more loan offers to pick from. - better interest rates on your loans. - easier to get an apartment