Chapter 7 Buying Decisions. Slide 2 Where Can Consumers Get Credit? Credit is the ability to borrow money and pay it back later. 7-2 Getting Started with.

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Presentation transcript:

Chapter 7 Buying Decisions

Slide 2 Where Can Consumers Get Credit? Credit is the ability to borrow money and pay it back later. 7-2 Getting Started with Credit o Service credit o Credit cards o Store accounts o Charge cards o Consumer loans o Lines of credit

Slide 3 Installment Payment Plan 7-2 Getting Started with Credit Installment credit is used to finance a high- priced item with a series of equal payments made over a set period of time. Installment Plan for a Refrigerator Amount borrowed $1, Annual rate of interest 16% Number of monthly payments 36 Amount of monthly payment (including both principal and interest) $42.19 Total amount to be repaid (36 payments of $42.19) $1, Total interest paid for the loan $318.84

Slide 4 What Are the Benefits of Credit? 7-2 Getting Started with Credit Convenience and rewards o Pay one bill each month o Get points or bonuses Increased spending power Records and protection

Slide 5 Focus On Getting Started with Credit What’s in a Credit Report? A credit report is a statement of your credit history: your borrowing and repayment performance. It helps creditors determine your ability to pay new debt. It is issued by a credit bureau. It can affect your financial future. You have a right to see your report.

Slide 6 Success Skills 7-2 Getting Started with Credit Managing Your Credit Score Your credit score (FICO) is compiled on a point system. It is calculated based on five categories: payment history, amounts owed, length of credit history, new credit, and types of credit. An excellent score is in the range. You can improve your score. o Examples: pay debts promptly, pay more than the minimum, reduce amount owed