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Published byAugustine Wood Modified over 9 years ago
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Credit Wisdom
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Managing Money & Credit: A Lifelong Skill
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Why Credit is Important FICO or credit score: Credit Card Issuers & Lenders –Determine APR Auto Insurers – Determine Premium Employers – Are you a worthy hire? Landlords –Are you a reliable tenant?
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The Three Cs of Credit Character: The way you handle money and have repaid debt in the past. Capacity: Your ability to pay the debt after considering other monthly expenses. Capital: The value of your assets or what you own.
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Advantages & Disadvantages of Credit Card Advantages –Convenient –On-line purchases –Kick-backs i.e. cash, airline miles, etc. –Can rent a car Disadvantages –Doesn’t seem like real money –Easy to overspend
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Use Credit Wisely You should use credit to buy: –House –Car –Education (student loan) and you’ll avoid trouble
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Only Buy What You Can Afford Pay off monthly balances –Avoid interest –Avoid late fees Know your budget Know yourself –Are you an impulse buyer?
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Pay More than the Minimum If you have a credit card balance: –Make a plan to pay as much as you can every month –Start with the credit card with the highest interest rate –Pay off the credit cards as quickly as you can
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Limit the Number of Cards Americans have an average of 8 credit cards
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Always Pay on Time Avoid late fees Keep your money in your pocket Maintain a good credit score –Late payments have the biggest negative impact. Easiest way to make money is to save money.
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Choose a Low Rate 0% is lowest –But remember the catch 15.75% average fixed rate. If you pay your card off every month, the rate won’t matter.
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What Not to Use Credit For: Pay Day Loans
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Payday Loans / Check Cashing Stay Away! What is it? –Cash Loan –Extremely High Interest –Short-term (14 – 45 days)
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How Do They Work? You postdate a check They give you a loan Loan last for 2 weeks They charge you a fee for borrowing the money—equivalent APR can be over 300%.
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Risks of Payday Loans Not a long-term cash solution Borrowers get trapped in a payday loan cycle of debt –Take out loan after loan
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