Understanding Credit
What is credit?
The ability to borrow money and pay it back later
What is a credit score?
A three digit number showing how trustworthy you are with money
What is a credit limit?
The maximum amount you can borrow
What is interest?
The cost of borrowing money
What is one common mistake students make?
Maxing out cards or missing payments
Name one opportunity credit can help you access
Apartments, car loans, jobs
What is the credit score range?
300–850
What is the recommended credit utilization percentage?
30% or less
What does APR stand for?
Annual Percentage Rate
What is a “hard inquiry”?
A credit check from applying for credit
Why is credit important for college students?
It affects future financial opportunities and independence
Who may check your credit score?
Lenders, landlords, employers
If your limit is $1,000, how much should you spend?
About $300 or less
What happens when you only pay the minimum balance?
Debt carries over and interest builds
Why is applying for too many cards risky?
It lowers your score and signals risk
What can happen if credit is mismanaged?
Long-term financial challenges
What does a high credit score signal?
Responsibility and low risk
Why does high credit utilization hurt your score?
It signals you rely too much on credit
Why is paying in full better?
Avoids interest and builds strong credit
What is one smart way to use a credit card?
Use for planned expenses and pay it off
According to the passage, what determines whether credit is helpful or harmful?
How responsibly it is used
What is the MOST important factor in your credit score?
Payment history
What utilization percentage often gives the BEST results?
Less than 10%
What can happen to a $500 purchase if only minimum payments are made?
It can grow significantly over time due to interest
What is the BEST long-term strategy for credit cards?
Spend responsibly and pay in full every month