Credit The ability to borrow money with the agreement to pay it back later Usually includes interest Debtor—a person who borrows money

Credit application will require: Applying for Credit Credit application will require: Address Employment Income Bank information Other credit you have

Creditworthiness: The Four Cs Capacity—your ability to pay Character—your sense of obli-gation and responsibility to pay Capital—cash, savings, invest-ments, possessions Collateral—property of value used as security for a loan

Credit History Experian TransUnion Equifax Credit bureau—an agency that collects information about you and reports whether you pay bills on time and how much you owe Experian TransUnion Equifax Access all 3 at annualcreditreport.com

Sources of Credit Bank credit cards Examples: VISA, Mastercard Type of revolving credit—charge to the account as often as desired up to a stated dollar limit Cardholder makes monthly payments for the full amount or part of the debt

Sources of Credit Store account Credit account that allows you to charge items only at that store Revolving credit account Installment credit plans—payments are made and the balance is paid off in a set period of time Charge cards A form of credit card in which the balance must be paid in full each month Example: American Express

Sources of Credit Loans Installment loan—set amount borrowed for a set period of time and regular payments are made to pay off the amount borrowed plus interest Single-payment loan—The entire amount plus interest is repaid in one payment on a certain date

Cosigner A person who signs the loan agreement along with the borrower, pledging to repay the loan if the borrower doesn’t

Paying for Credit Cards Minimum payment How much you must pay each month on a credit account (typically a small percentage of the balance owed) Penalties and fees Penalty—fee charged for violating the credit agreement (late payment, etc.) Over-the-limit fee—charging an amount over your preapproved limit

How Long Does it Take? Paying the Minimum