What
do you think of when
you hear the
word credit?
Try
to think of
at least 3 things…
Click
on the faces below to see their answers.
You're
all right!
Credit means a couple different
things in the world of money.
1. Like Ratt and Pedro thought,
credit means a good reputation-a
reputation that allows you to be
trusted by people who might loan
you money.
2. Like Mary
said, credit also refers to an agreement
that people have with a bank or
a store that allows them to buy
things and pay for them later. Credit
Cards are a way of borrowing
money.
So,
both meanings of credit are related.
If you don't have a reputation that
you can be trusted, no one will
want to loan you money or issue
you a credit
card.
Watch
a movie about Vicki and Money Mouse to learn more
about credit!
UP
TO LIST OF BIG IDEAS
II.
How Credit Works: All about Interest
So
what's the catch?
Why would a bank or store want
to give you
a loan (in the form of
a credit card)?
Think
about it…
When
a customer uses a credit card,
the bank or store that issues
the credit card pays for the
purchases
the customer made. The customer
is responsible for paying
the bill
when it arrives.
Here's the catch:
If
the customer does not pay
in full, he or she will be
charged interest.
If the
customer pays late, he will
be charged late
charges that range from
$25 to $30.
Let's
take a closer look at
interest.:
*
When
you have a savings account
you can earn interest on
your money (to learn more
about how you can earn interest,
click
here
*
If
you have a credit card
and don't pay your bills
in full and on time, you
will have to pay interest.
Here's
how it works:
Let's
say you bought a TV. The original price of
the TV was $499.
You paid for it over a period of 18 months
at $33.54 a month at 21 % interest.
1.
How much did you pay in total?
$499
$33.54
$603.79
2.
How much total interest
did you pay on the TV?
$0
$33.54
$104.79
$500
How
to figure this out:
You paid $33.54 per month X 18 months. This
equals: $603.792.
Since the original cost of the TV was $499,
you paid interest in the amount of
$603.79 - $499 = $104.79
The
amount you paid in interest
is what
the bank or store earns
for giving you a loan (in the
form of a credit card).
UP
TO LIST OF BIG IDEAS
III.
Credit History: What's it to ya?
Just
like cities or countries,
people have histories. Think
about yourself… Every
one of you probably has all
of the histories listed below.
Guess what they are and then
click to see if you
are right.
Family
History
Medical
History
Educational
History
Credit
History
Maybe
you didn't know about your CREDIT
HISTORY. It's very important
to build a good
credit history if you
want to get loans to purchase
a house or a car or pay for
college in the future.
Your
credit history is made up
of 3Cs:
A
Word to the Wise... Your
credit history will help you get ahead. Make
it a point to build the 3Cs
of your credit history-- Character,
Capacity,
and Conditions.
Now
that you understand the 3Cs,
who do you think has a good
credit history?
Penny
earns $15 per week and has $100 saved. Penny
sometimes forgets to return the things she
borrows from her brother.
Piggy
brings home $5 a week and has $50 saved. Piggy
is very careful about taking good care of
the things he borrows.
Ratt
borrowed a friend's CD player and never
gave it back.
Jayson
makes $40 a week but he does not have a savings.
He owes $50 to his uncle.
If
you don't have much of a credit
history yet, here's how you
can go about
building a good credit history:
1.
Set up a savings
account : It's a smart idea
to deposit money on a regular
basis and to never overdraw
your account.
2.
Put
utility services in your name:
Your telephone, electric, and
cable services are given to you
on credit with an understanding
that you will pay for what you
use every month. If the utility
bills are in your name and you
pay your bills on time, you can
use your monthly bill statements
as proof of your credit.
3.
Pay
any student loans on time.
4.
Obtain
a credit card and make your payments
on time.
Just
like a report card tells you
about your educational history,
a credit
report tells you about your
credit history. There
are 3 credit reporting agencies.
These agencies are: Equifax,
Experian, and TransUnion.
Click
here to see an example of a credit report
You
can get a free sample of your
credit report on-line at here.
Be sure to say NO
to any offers for trial memberships
though. The company will charge
you if you say yes. You can
also order complete copies of
your credit report from:
So,
maybe you've made some mistakes
and you don't have a good credit
history…. Maybe you've
wracked up a lot of credit card
debt or maybe you're in over
your head with monthly bills
and you can't seem to pay anything
on time.
What
do you do then?
Don't
get discouraged! You can get
through this.
I did!
Here
are some steps to follow:
1
Order
a copy of your credit
report and score and review them carefully.
See where exactly you've had problems and
what you need to correct.
2
Set
up a budget immediately and discuss with your
family how you can cut costs. Set family budget
goals and limits!
Click
here for more information on setting up
a budget
3
Put
your credit cards in a bottle of water and
put bottle in the freezer. Do not use your
credit cards!
4
Get
Help! Talk with someone at the Consumer Credit
Counseling Service (CCCS). This is a non-profit
organization that provides free or low-cost
financial counseling assistance. You can go
to the CCCS
website or call them at 1-800-388-2227.
5
Be
wary of "credit repair" clinics
that promise to remove late payments, fees,
etc.
Money
Center 
