Credit Basics
What is credit?
Credit is the ability to borrow money or access goods or services with the understanding that you'll pay later.
What is a credit card?
A credit card is a card issued by a financial institution that allows the holder to borrow funds to make purchases.
How can you build credit?
You can build credit by opening a credit account, using it responsibly, and making payments on time
What happens if you miss a payment?
Missing a payment can result in late fees and a negative impact on your credit score.
What are ways to improve your credit score?
Ways to improve your credit score include paying bills on time, reducing debt, and not applying for too much new credit at once.
What is a credit score?
A credit score is a numerical representation of a person's creditworthiness, ranging typically from 300 to 850.
What are loans?
Loans are sums of money that are borrowed and expected to be paid back with interest over time.
What is a secured credit card?
A secured credit card is a type of credit card that is backed by a cash deposit made by the cardholder
What is a late fee?
A late fee is a penalty charged by lenders when a payment is made after the due date.
What is a credit monitoring service?
A credit monitoring service helps individuals track their credit score and report, alerting them to changes or suspicious activity.
What are credit reports?
Credit reports are documents that contain detailed information about an individual's credit history, including accounts, payment history, and debts.
What is a mortgage?
A mortgage is a specific type of loan used to purchase real estate, where the property serves as collateral
What is an authorized user?
An authorized user is someone who is allowed to use another person's credit card account without being legally responsible for the debt
How can bad credit affect you?
Bad credit can lead to higher interest rates, denied credit applications, and difficulty renting homes or getting certain jobs.
What is a credit dispute?
A credit dispute is a process where an individual challenges incorrect information on their credit report.
What is a credit limit?
A credit limit is the maximum amount of credit that a lender will extend to a borrower on a credit card or line of credit
What is an installment loan?
An installment loan is a type of loan that is repaid over time with a set number of scheduled payments
What are credit-building loans?
Credit-building loans are small loans designed to help individuals build or improve their credit scores.
What is a collection agency?
A collection agency is a business that pursues payments on debts owed by individuals or businesses.
What role do credit utilization ratios play?
Credit utilization ratios measure the amount of credit being used compared to the total credit available, and a lower ratio can positively impact credit scores.
What is the purpose of credit?
The purpose of credit is to allow individuals to purchase goods and services now and pay for them later, enabling financial flexibility
What is revolving credit?
Revolving credit is a type of credit that allows the borrower to borrow, repay, and borrow again, such as credit cards
What is the importance of paying bills on time?
Paying bills on time is crucial for maintaining a good credit score and avoiding late fees.
What is bankruptcy?
Bankruptcy is a legal process through which individuals or businesses can eliminate or repay their debts under the protection of the bankruptcy court.
What is the impact of hard inquiries on your credit score?
Hard inquiries can temporarily lower your credit score and indicate that you're seeking new credit.