What is credit?
VOCAB to KNOW:
__________________: trust given to another person for ________________ payment of a loan, credit card balance, etc
__________________: A person or company to whom a debt ______ _____________
__________________: A person or company that _____________ a __________ (has a liability)
___________________________________ ratio: Calculation of your ability to pay off debt, by dividing your total
liabilities by your net worth
Sources of Credit
1. _______________________ and Credit Unions
2. ___________________ Stores—credit card offers;
installment payments
3. Finance companies*--your typical source; can charge
high interest rates for those with low credit scores
4. Credit card _______________ advances
5. Savings & Loans companies
6. __________________ stores
7. Mortgage brokers/lenders
Types of Credit
I.O.U. (______________________________ loans)
Revolving Credit (credit cards)
Installment Loans
Student loans (subsidized and unsubsidized)
Real estate loans (mortgages)
Cash loans
Car loans
Sources to avoid
1. “____________________” loan/check cashing
companies—use your next paycheck as
________________________ for the loan; creates
“_________________________________” of borrowing
2. Predatory lenders (“sharks”)
3. Pawnshops (if you don’t pay your balance on loan)
 _______________________-based
 Balance owed + all added fees -- before the
deadline, which is usually ___ to ____ months
after the initial transaction
 If you don’t pay your loan, the pawnshop
__________ and can _________ your item
Avoiding abusive lending practices
1. Have you shopped around for the best deal?
2. Do you feel the lender pressured you to take the
loan?
3. Do you understand the terms of the loan?
If the answer is not in your favor, don’t be afraid to ask
and research—make an INFORMED decision!
Things to Do to Establish and Maintain Good Credit
Always pay your bills _______________________________.
Have checking and savings accounts that are _________________________ (meaning, you record and check the balance
often).
Avoid ____________ _____________ by paying on time, every time.
Get a copy of your _________________ _____________________ every year.
• Check to make sure it is _________________________, and report any problems with it ___________________.
Do not live off credit or be tempted to use credit to spend __________________________________________________.
Use credit card numbers only when you are sure the
____________________________ is ___________________.
• Online, look for “verified” or “secured” payment types:
When to best use credit
1. In times of emergencies, family crisis, unexpected
illness, etc.
2. As convenient way to manage income by keeping
track of spending—if bills are paid in full each
month
3. Benefit of having large items such as a home, car,
and appliances while still paying for them
When it’s not best to use credit
1. If you cannot control your own spending
Creates fees, compounding interest
2. When credit takes away your needed income,
just to pay off your loan(s)
Think about wants vs. needs!
3. When there is concern that the credit
cards/numbers may be stolen
4. Think about lender reliability and security
QUESTIONS TO ASK WHEN APPLYING FOR CREDIT
1. What is the __________________________?
2. What is the ________________________ ___________________ _____________ (APR)?
3. When are ___________________________ due?
4. What is the ___________________________________________ required each month?
5. Is there a ______________ period?
6. Are there other fees associated with the credit, such as minimum finance charges?
7. What is the ________________________________?
8. What are the _______________________ for late or missed payments?
9. What are the terms and conditions of the credit? What else is included in the fine print?
Keep in mind:
The _________________ the
loan period, the _____________
the price of the product
purchased on credit (and vice
versa)
• Less interest is being
paid!
• Try to avoid paying only
the minimum amount
due
________________________ on
a loan can reduce the time and
cost of the loan
• Making larger payments
than required
• Check to make sure
there aren’t any fees to
do this
Your lender can deny loans
based on your credit history,
credit score, inadequate income,
or lack of assets
Source: bankruptcy-canada.com/bankruptcy-blog/secured-debts-vs-unsecured-debts-in-bankruptcy-in-canada/
ALWAYS compare interest rates
and fees before taking out a loan or
applying/using a credit card
• Check whether your interest rate is fixed or variable; the total cost is the amount borrowed plus the interest
paid over time
• Check if/what type of collateral is needed for certain loans (Assets, co-signers…)
• What happens if you default?