Unit 9: Financial, Economic, and Business Technology Competency 3: Select strategies to use in handling credit and managing debt.

Unit 9: Financial, Economic, and Business Technology

Competency 3: Select strategies to use in handling credit and managing

debt.

What is Credit?

Credit is the privilege of borrowing money with the promise to pay it back later.

What is Credit?

Your first venture into a loan will most likely be through a credit card.

Using a credit card is really taking out a loan.

Credit-card companies and banks that issue credit cards are letting you borrow their money when you use their cards.

Credit History

Credit history is a complete record of your credit performance.

Building a credit history takes time and patience.

Something as simple as keeping a cell phone bill paid on time builds credit history.

Credit Records

Before you are granted credit, a creditor (whoever will grant you credit) will ask about your past credit performance. Were your bills paid on time? How much total credit did you receive?

Your Credit File

Everyone who uses credit has a credit file.

A credit bureau is a company that maintains credit files.

Credit Bureau

There are three major credit bureaus:

Equifax Experion TransUnion

Credit Report

A credit report is issued by a credit bureau and contains relevant information about a person’s credit history.

About all of your public information goes on your credit report. Personal information Current and previous employers Failing to pay bills Filing for bankruptcy

Advantages of Credit

Credit can provide emergency funds.Builds a good credit history (if used

responsibly).A safe alternative to cash.Gives you time to pay.

Disadvantages of Credit

Credit purchases may cost more than cash purchases. (finance charges).

Future income is tied up when credit is used. Car payments House payments

Buying on credit can lead to overspending.

Kinds of Credit

Open-Ended Credit (limit placed on amount borrowed)

Closed-End Credit (loan repaid in fixed payments)

Service Credit (service done and paid for later)

Layaway Plans (regular payments made on merchandise held in your name)

Getting Credit Started

Open a savings accountOpen a checking accountUse Parents to get started

May need parents to co-signGet a small loanApply for a bank credit card