Basic Info:
What is a credit card?
A credit card is a revolving line of credit. It allows borrowing money up to a limit for purchases. The borrowed money must be paid back monthly.
What is the minimum payment?
Only making the smallest amount possible payment each month.
What is a secure credit card?
A secured credit card is a tool for building or rebuilding credit that requires a refundable cash deposit as collateral, typically equal to the credit limit.
What is a student loan?
A student loan is a type of financial aid borrowed from the government or private lenders to pay for education-related expenses, including tuition, fees, books, and housing.
What is a credit score?
A credit score is a 3-digit number, typically between 300 and 850, that predicts how likely you are to repay debt on time. Calculated from your credit reports, it helps lenders, landlords, and insurers assess risk when you apply for loans or credit cards.
Why should you always read the “fine print”?
You should always read the fine print because it includes the most important information.
What is compound interest?
Compound interest is the interest earned on both the initial principal and the accumulated interest from previous periods, allowing investments to grow faster than with simple interest.
What are fees and interest rates?
Interest rate refers to the annual cost of a loan to a borrower and is expressed as a percentage.
Why would someone want to take out a loan?
For buying big purchases, for schooling, etc.
How could you mess up your credit score?
You can significantly mess up your credit score through various actions, with the most impactful being late payments, high debt usage, and applying for too much new credit in a short time.
How to improve credit scores?
Credit scores can be improved by making on-time payments, keeping credit utilization low, and keeping old accounts open.
Why should you always pay on time?
You should pay on time because debt can stay with you for life, it can prevent you from getting loans, jobs and future opportunities.
What is a credit limit?
A credit limit is the maximum amount of money a lender allows you to borrow on a credit card or line of credit at any given time.
What is a loan?
A loan is an amount of money you borrow from a financial provider that you promise to pay back over a specific period of time. It is a form of debt that allows people or businesses to fund large purchases, consolidate debt, or cover expenses immediately while paying it back over time.
How to improve a low credit score?
Start making payments on time. This accounts for 35% of your FICO score. Other strategies would be keeping credit utilization below 30%, reducing existing debt, disputing credit report errors and avoiding opening too many new accounts. You could also consider getting a secured credit card or builder loans to establish a positive payment history.
Where to get loans?
Banks, credit unions, and online lenders are common sources.
Why should you never get multiple credit cards?
Because opening multiple cards can tank your credit score.
What are the penalties of late payments?
Being charged with a late fee, or other financial penalties.
What is an unsecured loan?
An unsecured loan is a type of credit not backed by collateral (such as a home or car), meaning approval relies on your creditworthiness, income, and debt-to-income ratio rather than pledged assets.
What is a credit bureau?
A credit bureau is a company that collects individual financial data to create a credit report.
What's the difference between a credit union and a bank?
Credit unions are not-for-profit, member-owned cooperatives typically offering lower fees, lower loan rates, and higher savings rates compared to for-profit banks. While banks offer wider ATM/branch networks and advanced technology, credit unions focus on personalized service.
What are the main causes of debt (list 3 examples)?
Medical bills, student loans, over spending, high cost of living, lack of budgeting.
What is the grace period?
The grace period is a period, often 25 days, after a purchase. No interest is charged if the balance is paid in full.
How do you qualify for a loan?
To qualify for a loan, you generally need a good credit score (often 670+ for good rates), stable income, a low debt-to-income ratio (DTI), and sufficient documentation like ID, proof of income (pay stubs, tax returns), and address (utility bills) to prove your financial stability and ability to repay the loan. Lenders assess these factors to determine risk, so improving your credit and managing debt are key steps.
What is a credit report?
A credit report is a detailed, 7-10 year record of your financial history, documenting how you manage debt, including credit cards, mortgages, and loans.