BUDGETING FOR COLLEGE:
Credit Cards & Credit Reports
Andrea Morgan, Gary Moore, Melissa Greenslade
Program Coordinators
University of Arkansas, Office of Financial Aid
What is Credit?

Credit the extent to which someone, usually a bank,
is willing to loan you money and trusts that you will
pay it back in the future.
Benefits and Rewards of Using Credit
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Can be helpful in emergency situations
Can be safer for online purchases or travel
Safer than carrying cash
Establish good credit history
Risks of Credit Cards
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Easy to make impulse purchases
Interest rates (APR) and fees can add up and
increase the amount you owe
Could damage your credit report
Establish Healthy Credit

Having a good credit history is important!
 To
qualify to borrow more and at a lower interest rate
on future purchases, like buying a car or a house

Types of Credit:
 Revolving
 Secured,
Accounts: Credit Cards
Store, Standard
 (Retail)
Installment Loans
 Mortgage Loans
 Student Loans

Don’t use over 15-20% of your net income for nonmortgage debt payments
Types of Credit:

Secured Credit: something of value is presented to
the lender as collateral in case you default on the
loan.
 Examples:
Vehicle or House Loans – if you don’t pay,
the lender can take back your car or house.

Unsecured Credit: a loan that does not have
collateral securing the loan. If you stop paying,
there is nothing for the lender to take back.
 Examples:
Credit Cards, Student Loans, Personal Loans
Dangerous Credit!
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Payday Loans
Cash Advance on your Credit Card
Rent to Own
Credit Card Rules for Those Under 21
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Anyone under 21 will need a co-signer for a credit
card and/or to prove ability to pay
The co-signer must agree in writing to any credit
limit increase
Consumers under 21 can sign up for a secured
credit card.
Evaluating Credit Card Offers

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www.federalreserve.gov/creditcard
When evaluating a credit card offer consider:
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APR (Annual Percentage Rate)
Grace Period
and Fees
(sample credit card offer handout)
APR

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Annual Percentage Rate: the actual cost of
borrowing money, expressed in the form of a yearly
measure (monthly interest = APR)
Can be Fixed or Variable
 Fixed
stays the same throughout the loan
 Variable rates can change annually, monthly or
quarterly

Average Credit Card Interest Rate: 14.97%
(#1-6 and 12 on sample credit card offer handout)
Credit Card Grace Period

The Grace Period is the number of days you have
before you’ll be charged interest on your purchase
amount, usually between 20 days and 1 month.
(#5 on sample credit card offer handout)
Credit Card Fees
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Annual Fees – between $25 and $60
Cash Advance Fees
Balance Transfer Fees
Late Fees – average $29
Over the Limit Fee - $25 per purchase
(#7, 8, 9 on sample credit card offer handout)
What to Look for in a Credit Card Offer
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Look for the lowest APR, no annual
fees, a grace period, and rewards
you might be interested in getting
(cash back, airline miles, etc.)
Good credit sources will be able to
offer lower interest rates, provide
repayment assistance, and remedy
errors and correct billing statements
 www.cardratings.com
(credit cards tab)
Reading Your Credit Card Statement
(sample credit card account statement handout)
www.federalreserve.gov/creditcard
1.
Summary of Account Activity
2.
Payment Information
3.
Late Payment Warning
4.
Minimum Payment Warning
5.
Notice of Changes to Your Interest Rate
6.
Other Changes to Your Account Terms
7.
Transactions
8.
Fees and Interest Charges
9.
Year-to-date Totals
10. Interest Charge Calculation

Repayment Example
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Credit Card Balance = $1000
APR 15%
$20 minimum payment
How long to pay off loan at minimum payment?

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7 years!
How much interest will be charged during that time?

$580!
Credit Card Repayment Calculator:
www.federalreserve.gov/creditcardcalculator
Credit Reports and Credit Scores

A credit report is a collection of information about
you and your credit history
 Includes
personal information, account information,
some public record information, inquiries into your
credit, and creditor information list
 Free credit reports available annually at
www.annualcreditreport.com

A credit score is a number predicting how risky it
may be to lend you money.
 Fair
Isaac Score (FICO) or VantageScore
What Makes Up Your Credit Scores
FICO Score
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Payment History- 35%
Outstanding Balances30%
Length of Credit History15%
New Credit- 10%
Credit Mix- 10%
Best: 850 Good: 720 Worst: 300
VantageScore
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Payment History- 32%
Utilization- 23%
Outstanding Balances15%
Depth of Credit- 13%
Recent Credit- 10%
Available Credit- 7%
Best: 900-990 Worst: 501-599
Why are Credit Reports and Credit
Scores Important?
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Lenders usually look at your credit history to help
determine whether they will extend you credit, how
much, and at what interest rate
Employers and Service Providers may also look at
your credit history
Making late payments, having too many credit
cards, or being up to your credit limit can have a
negative impact on your credit score
Negative information can stay on your credit report
for 7-10 years
Be a Good Credit Consumer
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Wisely consider the types of debt you have
Only borrow for purchases that help you make
money, grow your wealth, or satisfy basic needs
Use credit cards sparingly; keep debt balance low
Stop charging the moment you know you can’t pay
the entire balance
Pay off credit cards in full and on time each month,
or at least pay more than the minimum amount
Know your budget and live within your means
What if you Are in Over Your Head?
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Set a budget and stick to it!
Pay more than the minimum payment amount
Call your credit card company to see if they can work
with you on a payment plan
Pay off debt with the highest interest rate first
or pay off debt smallest balance first
Find a reputable credit counselor
Use savings or assets to pay off debt
Maintain a good payment history for 6
months and then petition to lower your
interest rate
The Long and Short of It…
College Credit for Life
http://www.youtube.com/watch?v=dKzrfy0iVLs
Before you go…
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
Please complete and submit your evaluation forms
PowerPoint presentation and handouts will be
posted on our website
Thank You!

Contact Information:
Office of Financial Aid; Andrea, Gary, and Melissa
 Campus location: 114 Silas Hunt Hall
 Phone: 479-575-3806
 Fax: 479-575-7790
 Website: http://finaid.uark.edu/
 And find us on Facebook at University of Arkansas
Financial Aid!
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