1. Chapter 7 Buying Decisions

2. 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

3. 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 $1,200.00 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) $1,518.84 Total interest paid for the loan $318.84

4. 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

5. Slide 5 Focus On... 7-2 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.

6. 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 700-850 range. You can improve your score. o Examples: pay debts promptly, pay more than the minimum, reduce amount owed