Unit 4 Credit

Credit Score

100

What is a credit score?

A 3 digit number that lets lenders know how reliable you are with paying back borrowed money. 

200

What 2 main things does your credit score affect?

1. Whether you will or will not get accepted for the loan 

2. The interest rate

300

What is a good credit score?

750+

400

2 things you can do to start building credit as a young person are

Get a cosigner

Start paying student loans

Get a secured credit card

Be an authorized user on a parent's/guardian's credit card

500

What are the 5 factors that impact your credit score?

1. Payment History

2. Mix of Credit

3. Capacity

4. Length of Credit

5. New Credit

Loans

100

What is a loan?

Borrowing money from someone (like a bank) that you promise to pay back later

200

What is the word for the extra charge on a loan?

Interest

300

The longer your loan term, the __________ you pay in total. The higher your interest rate, the __________ you pay in total.

More; more

400

Define Principal

Define Loan Term

Principal- The amount you are borrowing

Loan Term- How long you have to pay back the loan

500

When would you get a loan vs when would you use a credit card?

You normally get a loan for a big purchase.

You normally use a credit card to make a bunch of small purchases. 

Cards

100

The main difference between a debit card and a credit card is

With a credit card- you are taking out a loan for your purchase that you must pay back

With a debit card- you are using money directly from your checking account

200

What can you build with a credit card but not a debit card?

Your credit score

300

If you do not pay back the money you used on your credit card within your billing cycle you get charged what 2 things?

Interest and possibly late fees

400

Only making the _____________ payment every month can lead you into large debt. 

minimum

500

If you are under 18 and want to get a credit card, what should you do?

Be added as an authorized user on your parent's credit card

Borrowing

100

What is one benefit of borrowing money from family or friends?

Friends and family will typically work with you to set up a repayment plan you can afford

200

What is one downside to borrowing money from family or friends?

It might cause problems in your relationships if you don't repay on time or if you then ask for even more money

300

What is one tip when loaning money to friends?

1. Consider your financial situation
2. Consider the other person’s finances
3. Consider your relationship with the other person
4. View the money as a gift
5. If it’s a loan: write down the loan terms + pay them using peer-to-peer apps

400

What are 2 other ways to help a friend besides lending them money?

Help your friend job search.

Be a listening ear. 

Buy them groceries if they are in a tight spot. 

Help them make a budget. 

500

What is the first thing you should ask yourself before helping out a family member or friend financially?

Can I afford this?