The Power of Credit

The Power of Credit!
Understanding How Credit

Affects Our Lives
Provided by:
The Credit Education Bureau
585-256-6080
Credit is:
An arrangement for deferred payment
of a loan or purchase.
Simply put: credit is a loan.
Purpose:
To learn what credit is really about
and how to use it properly.
What can be learned
about the power of
credit?
Why your credit history is so important.
How credit cards work.
How interest works.
How to get credit.
How to Use or Abuse Credit.
1. Why your
credit history is
so important.
Your Credit
History is
Your
Financial
Report Card!
By law a lender
cannot deny credit
because of:
Age, race, gender, marital
Age, race, gender, marital
status, religion, national
origin, or receipt of public
assistance.
Creditors can only use
your income and credit
history to make their
determination.
Your credit history
affects your future:
Having a good credit
history will enable you to
get the things you want.
Having a bad credit
Denied!
history…
will keep you from getting
Denied! the things you want.
Negative information is
Denied! reported for 7 years.
Denied!
Denied! Denied!
In order to have a
good credit
history…
You must pay your bills
on time.
You shouldn’t have any
debt.
You Shouldn’t have too
many accounts.
One of the biggest
problems…
1.3 million people filed for bankruptcy between May
1998 and May 1999
the negative .6 percent savings rate reported during the
first quarter of 1999 was the lowest since figures in 1946
Americans owed $1.3 trillion of unsecured consumer debt
as of April 1999
2.38 percent of unsecured accounts were delinquent
during the first quarter of 1999
60 percent of families did not have a work sponsored
retirement plan as of 1995
2. How Credit
Cards Work.
Credit Cards Aren’t
Free Money!
Credit is an arrangement
for deferred payment of a
loan or purchase.
If you spend $100 on your
Visa or MasterCard, you
have to pay $100 back.
If you can’t pay the $100
back all at once, the credit
card company will charge
you extra.
It Can Cost More to
Use Credit.
You may only have to pay
the minimum payment of
$10 on a $500 balance
but…
If you don’t pay off the
balance every month:
You will be charged
interest.
It Can Cost More to
Use Credit. Some companies charge
annual fees for having a
card.
And, if you are ever
late making a
payment…
You will be charged a late
fee.
Most companies will
increase your interest rate.
3. How Interest
Works.
Interest is a Percent
of the Amount You
are Loaned.
A credit card with a 20%
interest rate…
A balance of $1000…
Will be charged $16.60 a

month in interest.
The Longer You
Pay, The More You
Pay.
If you only paid the
minimum payment of
= $20 each month on a
balance of $1000…
It would take 8 years and
5 months to pay off the
balance.
= It will cost $1087 in
additional interest.
It’s all about the
APR!
APR stands for
Annual Percentage
Rate.
It’s the annual
average total cost
of the interest,
principal and
finance charges.
Here’s How it adds
up:
Lets say your credit card
has an APR of 18%
You purchase a new
computer for $750
You only pay the minimum
payment of $15
The interest owed would be
$12
The APR of 18% = 1.5%
interest per month
You still owe $747
4. How To Get
Credit.
Demonstrate That
You are a Good
Risk
You have to be at least 18
years of age.
Have a regular source of

income.
Open a checking and

savings account.
Establishing a
Credit History:
First, consider a “secured”
credit card.
Requires a bank account as
security.
Your limit is your deposit.
Establishing a
Credit History:
Secondly, consider
applying for a store card.
Sears, Kaufman's, JC
Penny’s, etc.
Easier to be approved but
have higher interest rates.
Establishing a
Credit History:
Thirdly, if all else fails,
consider asking someone
to co-sign for you.
Perhaps a relative.
Someone with an
established credit history.
They promise to pay your
debts if you don’t..
None of These
Things Will Work
Unless…
You use credit wisely.

5. How to Use or
Abuse Credit
The Bottom Line…
Don’t use more credit than
you can handle.
Only spend as much as you can
pay off each month.
Never have more than 2
credit cards at a time.
Too much credit is just as bad
as not having enough.
The Bottom Line…
Pay your bills on time.
Being as little as 30 days late
will stay on your credit file for 7
years!
If you are going to be late, call
your credit card issuer.
They can work out some kind of
arrangement if you call before
you’re late.
The Bottom Line…
Credit cards should be used for
convenience or for emergencies
only.
They should not be used to buy
things you could not otherwise
afford.
“What would we have if there
weren’t any credit cards?… 18%
more stuff!”
Don’t Abuse
Credit…
If you don’t use credit
wisely:
It will affect your credit report.
You will have trouble obtaining
future credit.
You will end up paying more.
You may have trouble
obtaining employment.
The Power of Credit
Comes Down to…
Knowing your credit history affects your future.
Knowing that credit cards are a loan that must be
paid.
Knowing the costs of using credit.
Knowing how to build a credit history.
Knowing that credit can be a great tool if it’s
used properly.

The Power of Credit

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The Power of Credit!

Understanding How Credit

Will be charged $16.60 a

Have a regular source of

Open a checking and

You use credit wisely.

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