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CREDIT
Chapter 25
Credit Objectives:
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



Define credit and indicate three factors that affect
the interest
Name different groups in our economy that use
credit
Identify three advantages and disadvantages of
using credit
Name places where you can get credit and list the
three different types of credit cards
What is credit?
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
A promise
 Buy
now—pay later.
 A contract between
Vocabulary: Credit, Creditor, Debtor,
Credit Serves four (4) functions in our
economy
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1.
2.
3.
4.
Stabilizes the economy allowing for purchases
(Buy now and pay later)
Promotes Business Growth – allows for new
businesses to form
Expands Production – business can purchase new
capital
Raises the standard of living – as a consumer you
have more assets because of credit
IMPORTANCE OF CREDIT (Why do you
need credit?)
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



Car loan, mortgage, student loan etc.
Utilities
Insurance
Renting
PROS and CONS
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
Advantages
 Convenient
 Establishes
credit history
 Emergencies
 Risks with carrying cash
 Purchasing online
 Helps economy grow
DISADVANTAGES
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
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Costs are attached to using credit
Misuse – many people are not disciplined when
using credit
May lead to a Lower credit rating if you can not
stop spending
Credit Fraud
TOO MUCH DEBT!!!!!
Factors to Consider Before Using
Credit
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


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Is a Down Payment required?
Can I use Savings?
Can I really afford it?
Use credit now?
Or Wait to buy later
What are the Costs involved?
Sources of Credit
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
Credit Cards
 Single-Purpose
Cards (Revolving)
 Examples:
 Multipurpose
Cards (Revolving)
 Examples
 Travel
and Entertainment (Regular)
 Revolving
 Unsecured

Higher Rates
 Secured

– not guaranteed by other property or cash
– where property or cash is pledged for an asset
Collateral
Banks offer Credit
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

Single-Payment Loan (seasonal businesses)
Installment Loan –
 When

would I use…
Mortgage Loan
 Purchase
a Home
Other Sources of Credit
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
Seller-Provided Credit
 Buying
Furniture
 Examples:

Consumer Finance Companies
 For

People who have _______
Payday Advance Services
 Used

to cash checks & get loans
Pawnshops
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CHAPTER 26 –
HOW TO GET AND KEEP CREDIT
What I need to know…
Developing a Credit History

Without a History
 Banks
will not loan you money and/or
 You will pay very high interest rates

Ways to begin developing a Credit History
 Open
a Checking and Savings Account
 Get a Debit Card
 Apply for a Secured Credit Card
 Charge
Small balances and pay bill in full each month
NOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…
Developing a Credit History


You will have a good chance of getting a car loan,
mortgage or a personal loan
BEFORE APPLYING FOR A LOAN
 Check
your Credit Report – fix discrepancies
 Bring the following when applying for a loan:
 PROOF
OF INCOME: Pay stubs, tax reports, bank
statements, or any other proof of income
 PROOF OF IDENTITY: Social Security Number and Driver’s
License
they feel you are not credit
a Cosigner
 If
worthy you may need