What You Should Know About Credit

Credit is a Good Thing

• Wise use of credit can help you build your personal wealth
• Allows you to purchase goods and services you could not otherwise afford
• It can be a safe, convenient way to make and track purchases

Credit is Costly

• Most types of credit add a finance charge or charge a fee
  • A revolving account can cost you money
  • Monthly finance charge
  • Annual fee
  • Late and over the limit fees
• Making only the minimum payment
  • Extends the life of the pay back period
  • You are in good standing, but you are paying much more in finance charges
  • Creates a false sense of financial stability

Credit is Emotionally Charged

• Provides a sense of freedom, opportunity, power and prestige
• Hard to resist the feeling that you’ve been given money when you get a credit card
• Using credit creates a separation between buying something and paying for it

Credit is a Personal Decision

• Only you know how much you can afford. Life can be filled with unlimited wants but limited resources
• A spending plan helps anticipate expenses and gives a clear idea of how much credit you can afford
• Don’t use credit to supplement your income
• Only you can determine if you should use that credit card. Just because a creditor extends you credit does not necessarily mean that you can afford it
• What’s an affordable level of credit? Total of credit payments (including car payment, but not mortgage) = 20% of your take-home pay is generally accepted as reasonable. Beyond that, you may be overextended

Credit Follows You

• Your payment and account history is tracked by the 3 national credit bureaus, Experian, Equifax and Trans Union
• Poor credit history jeopardizes future purchases and prevents you from getting the best rates on loans, insurance, apartment rentals and even jobs
• To get your free annual credit report, go to www.annualcreditreport.com.
• To build and keep a good credit rating:
  • Only open credit when you need it
  • Pay all of your bills on time
  • Keep your balances low

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