1. Deciding on a credit card

2. Credit Cards Qualifying for Credit
Use of credit
Debitor – person who borrows money from others
Creditor – person or business that loans money to others.
Qualifying for Credit
Able to repay the loan – looking at: Income, financial & collateral
Income – need job, earn an income
interest, alimony, dividends, etc.
Financial Position – based on capital
Value of property (bank accounts, investments, real estate, & other assets) after deducting your debts

3. Credit Cards Qualifying for Credit (con’t)
Collateral – property to assure repayment of loan
Repossessed – lending institutions can take items used as collateral for nonpayment
Making Payments
Principle (amount borrowed) plus interest (time you have the loan) = balance due
Stores and credit card companies disclose the minimum payment
After due date:
a late fee – which will be added to your balance due

4. Sources of credit Banks and Credit Unions Finance Companies
Offer credit cards/Closed-End
Loans
Credit Unions – interest rates
might be lower than banks
Finance Companies
An organization that makes high-risk consumer loans (turned down by banks/credit unions)
Higher interest rate
Consumer Finance Companies - most of
loans to people buying durable goods
Sales Finance Companies – loans to people
through authorized representative
(GMAC Financial Services)

5. Credit Record
Credit History
complete record of your borrowing and repayment performance.
Credit Bureau – gathers, stores & sells credit information to other businesses.
Business’ record each credit card transactions.
Monthly – data is transmitted to one of the three credit bureaus:
TransUnion –
Experian –
Equifax –
Yearly report
Credit history is free to you every 12 months
Other services are available at additional costs

6. What goes into FICO Score

7. FICO Score
Score
Explanation (source: Personal Finance Textbook ISBN: )
800 – 950
Excellent
used credit wisely; has considerable capital but low revolving debt. Pays off credit monthly; rarely carries credit balance other than home mortgage loan
700 – 799
Good
Good credit payment record, good solid income and the ability to repay debts. Pays monthly credit obligations on time and pays more than the minimum
500 – 699
Fair
Considerable debt and is making obligations with the grace period, makes minimum payments; income is adequate, may have some small credit discrepancies
Below 500
Poorly
Not able to take on much debt some credit history but not well established; income may be questionable has had some credit problems in the past

8. Credit Card Records Credit Freeze
Consumers request a “freeze” their credit reports & files (for a fee)
New credit applications are blocked & loan solicitation information can’t be given by credit bureaus

9. Creditworthy The 5 C’s used to determine if you are creditworthy
Character: Will you repay the debt?
Responsible attitude toward honoring obligations
Pay bills on time
Capacity: Can you repay the debt?
Financial ability to repay a loan with present income
Capital: Do you have sufficient assets to support the debt?
Your assets are worth more than your debts (checking, savings, investments & real estate)

10. Creditworthy Conditions: What affects your ability to repay the debit?
External conditions – loss of job, economy
Collateral: What assets are pledged to support the debt?
House, car or furniture that is pledged to assure that payment

11. Credit Card Commercials
Watch the commercials.
What features of each credit card are being showcased? What marketing strategies are the credit card companies using?

12. How to Choose a Credit Card
Review this list of 10 tips for choosing a credit card.
Pretend you are about to open a credit card. Categorize each tip as
"Very Important for Me, Personally,"
"Somewhat Important for Me, Personally,"
"Not Important to Me, Personally."

13. Why 0% APR MIght Not Be Good for Your Credit
apr-offers-might-not-be-good-for-your-credit/
In your notes, write at least 3 reasons why a introductory rate or balance transfer APR of 0% might not be a good offer after all.

14. How to Maximize Your Credit Card Rewards
After watching this video, write down the tips for maximizing a cash back or rewards card.

15. Mom, Can You Co-Sign My Credit Card?
If you're under 21, you (most likely) cannot get your own credit card. You'll need your parent's help. Read this article and then explain the difference between co-signing, a joint account, and an authorized user.
card

16. ANALYZE: Should They Open a Credit Card?
Follow the directions on the worksheet to complete this activity.

17. Security Tips
If you decide to open a credit card, security is extremely important. Scroll to the bottom of this article to the section labeled "Security Tips & More Information.“
Record the tips into your notebook

18. Questions