1. Unit 4 Credit and Debt What is Credit? Someone lends you money 1. The original amount borrowed is called the ___ Principal

2. Common Types of Credit 2. Which type of credit has the highest interest rates? Credit Card 3. Which type of credit has the lowest interest rates? Student Loan / Mortgage

3. 5. Which type of credit has the longest term? Mortgage

4. Mortgage Details Requires a credit check Requires a down payment Typically 15 or 30 year term Interest rates may be fixed or variable (ARM)

5. The Cost of Using Credit 8. If an advertisement states “Buy now and pay only $19 a month.” – What is the ad NOT telling you? Interest rate, payoff time and payoff amount **Know the bold terms on p. 44 and 45 Credit Limit Finance Charge Loan Term Grace Period Late fee

6. Credit: The Good and the Bad Understand the “risks” and “rewards” of credit Risks: Interest payments, Overspending, Debt (legal claims against your future income), Identity Theft Rewards: Convenience, Emergencies, Build Credit, Quicker Gratification, Special Offers, Bonuses

7. 6 Questions to Ask When You Compare Credit (know them) 1.What is the interest rate (for purchases)? 2.How long is the loan for? 3.Minimum Monthly Payment?

8. The 4 C’s of Credit 9. An asset that lenders can take from you if you do not repay a loan is …. Collateral

9. 13. A history of paying bills on time helps demonstrate to lenders that you have good ___ and are worthy of getting a loan Character

10. Keeping Score With Your Credit 14. What is a FICO score? A number that reflects your credit worthiness based on the 4 C’s.

11. 16. Your credit score reflects your … Credit worthiness

12. 17. Credit scores range from ……..to…….. 300-850 18. Building and maintain a good credit score is as simple as…… Discipline 700 and above is good Below 550 is really bad

13. Be able to summarize the five ways to hurt your credit history and score. Late payments Too many credit cards/loans High balances These are not good ways to manage your credit

14. Getting Your Piece of the Credit Pie 19. As a student, there are 5 ways to begin building your credit history. Identify them. Co-sign on credit card Credit card from “your” bank Store credit card Rent and/or Utility bills in your name 20. Your first credit card will most likely have… Low limit