Credit Basics
What is Credit?
Money you borrow that you promise to pay back later.
What is one reason many people get financial help from family or friends when buying a home?
Because it's a common way to afford the down payment.
Which age group has the highest average credit card debt?
Millennials (27-42).
What is considered a "prime" credit score?
A score that helps you get better interest rates.
How does your credit score affect your ability to get a loan?
A higher credit score makes it more likely to get approved for a loan.
What is a key difference between a credit card and a debit card?
Credit cards allow you to borrow money that you pay back later.
What is one disadvantage of borrowing money from family or friends?
You might not prioritize paying them back because there are no immediate consequences.
What does "treating your credit card like cash" mean?
Only spending what you can afford to pay off each month.
Which factor is NOT mentioned as affecting credit scores?
Your education level.
According to the material, why is it important to understand your budget before taking out a loan?
To know how much you can afford to borrow and repay.
What happens if you do not pay your credit card bill in full?
You are charged interest on the unpaid amount.
According to the video about lending money to friends, what tip is helpful?
View the money as a gift in case it's not repaid.
If you have a balance on your credit card and stop using it for purchases, what happens to the interest?
Interest continues to accumulate on the remaining balance.
How can young people begin to build credit according to the document?
By becoming an authorized user on a parent's credit card.
What happens to the total cost of your loan if you have a lower credit score?
The total cost increases because you'll likely receive a higher interest rate.
What is one advantage of using a credit card in emergencies?
You can make a purchase even if you don't have the money right now.
In the case study about Monique and Nia, why was Nia asking to borrow money?
To pay her school fees.
What is a credit score primarily used for?
To evaluate your ability to repay borrowed money.
What is the primary purpose of a loan?
To allow borrowers to make purchases now and pay back over time.
If a credit card has a lower interest rate, what does that mean?
You pay less money in interest.
What is an important step Monique took before lending money to Nia?
She created a written repayment plan they both agreed to.
Which of the following is compared to a credit score?
A report card.
If you borrow $7,000 at 6% interest for 5 years, why would you pay $8,119.78?
Because of the interest that accumulates over the loan term.