The World of Credit

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The World of Credit
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What is Credit?

• Buy now, pay later
• Supplying money, goods, or services at the
  present time in exchange for the promise of
  future payment

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Advantages of Credit

• Able to buy needed items now
• Dont have to carry cash
• Creates a record of purchases
• More convenient than writing checks
• Consolidates bills into one payment

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Disadvantages of Credit

• Interest (higher cost of items)
• May require additional fees
• Financial difficulties when a person loses track
  of how much has been spent each month
• Increased impulse buying may occur

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The Three Cs of Credit
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1st C Character

• Will you repay the debt?
• From your credit history, does it look like you
  possess the honesty reliability to pay credit
  debts?

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Questions to Consider

• Have you used credit before?
• Do you pay your bills on time?
• Do you have a good credit report?
• Can you provide character references?
• How long have you lived at your present address
• How long have you been at your present job?

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2nd C Capital

• What if you dont repay the debt?
• Do you have any valuable assets that could be
  used to repay credit debts if income is
  unavailable?
• Collateral something of value pledged to insure
  payment of a loan
• Examples real estate, savings, or investments

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Questions to Consider

• What property do you own that can secure the
  loan?
• Do you have a savings account?
• Do you have investments to use as collateral?

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3rd C Capacity

• Can you repay the debt?
• Have you been working regularly to provide enough
  income to support your credit use?

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Questions to Consider

• Do you have a steady job?
• What is your salary?
• How many other loan payments do you have?
• What are your current living expenses? What are
  your current debts?
• How many dependents do you have?

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How You Can Build Credit

• Establish a steady work record
• Pay all bills promptly
• Open a checking account dont bounce checks
• Open a savings account make regular deposits

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Building Credit (cont.)

• Apply for a local store credit card make
  regular monthly payments
• Apply for a small loan using your savings account
  as collateral
• Get a co-signer on a loan pay back the loan as
  agreed