What Is Credit?
Define credit?
The ability to borrow money with the promise to repay it later.
What plastic card allows you to borrow money from a bank or lender?
A credit card.
What is interest?
The cost of borrowing money.
What number helps lenders decide if they trust you to repay money?
A credit score.
What does it mean to use credit responsibly?
Borrowing only what you can afford to repay.
Credit allows people to get goods or services now and do what later?
Pay for them in the future.
What is a loan?
Borrowed money that must be repaid with interest.
What does APR stand for?
Annual Percentage Rate.
Is a higher credit score better or worse?
Better
What happens if you miss credit payments?
Fees, interest increases, and credit score damage.
True or False: Using credit always means you are spending your own money.
Answer: False
Name one common type of loan.
Student loan, car loan, mortgage, or personal loan.
A higher APR means what happens to the total amount you repay?
You pay more money overall.
Name 4 factors that affect your credit score.
Payment history, credit usage, length of credit history, or debt.
True or False: Having no credit history is better than having bad credit.
True.
What is an example of using credit instead of cash?
Using a credit card or taking out a loan.
What happens if you only pay the minimum balance on a credit card?
You pay more interest over time.
If you borrow money and pay it back late, what usually increases?
Interest and fees.
How does paying bills on time impact your credit score?
Improves it.
Why is maxing out a credit card risky?
It increases overall debt and lowers credit score.
Why can credit be helpful in emergencies?
It allows access to money when cash is not immediately available.
Which usually has lower interest: credit cards or car loans?
Car loans.
Why do lenders charge interest?
To make a profit and cover risk.
Why might someone with a low credit score pay higher interest rates?
They are seen as a higher risk borrower.
How can responsible credit use impact your future?
Easier approval for housing, jobs, loans, and lower interest rates.