What is Credit?

Credit is the ability of the consumer to acquire goods or services prior to payment with the faith
that the payment will be made in the future. In most cases, there is a charge for borrowing, and
these come in the form of fees and/or interest.

Establishing Good Credit
A good credit score can impact multiple areas of your life, including your ability to rent or buy a
house, job opportunities, loans, and more, so establishing a good credit score now will pay off in
the future.

What is Considered a Good Credit Score?
The FICO credit score ranges from 300 to 850, with the lower scores representing higher credit
risk. A good credit score is generally considered to be anywhere from 690 to 850, with 850 being
an excellent credit score.

Here are ways to start establishing good credit:
-Open a checking and savings account
-Pay bills on time
-Pay down outstanding balances
-Check credit report yearly
-Protect your identity

Five Components of a Credit Score
-Payment History (35%)
-Ratio of Debt to Available Credit (30%)
-Length of Credit History (15%)
-Types of Credit Used (10%)
-Recent Searches for Credit (10%)

Checking Your Credit Report
A credit report contains your personal information along with your overall credit history,
inquiries made by companies to view your credit information, and more. Checking your credit
report frequently will prevent inaccuracy in your credit information that may lead to a lower
credit score and consequently, the denial of credit, loans, or even a job.

Tip: Remember to check the name, address, birthdate, Social Security number, and accuracy of
accounts on your credit report.

Where Can You Access Your Credit Report?
When it comes to checking your credit report, there are three nationwide credit reporting
agencies that will provide you with a free credit report, upon request, once every 12 months.

These three agencies are:
-Equifax
-Experian
-TransUnion

To request a free credit report from any of these agencies, visit annualcreditreport.com or call 1-
877-322-8228.

Tip: Instead of checking your credit report from all three agencies at once, spread them out every
few months so that you can monitor your credit throughout the year for free.

What is a Credit Card?

A credit card is essentially a means of borrowing money that is accompanied by interest and
sometimes fees. It is also a revolving line of credit, meaning you can repeatedly borrow money
on one account up to a set limit. Before applying for a credit card, you should first consider the
advantages and disadvantages of using one.

Advantages
-Use for emergencies
-Buy now, pay later
-Purchase protection
-Helps establish good credit if used wisely

Disadvantages
-Overuse
-High interest/annual fees
-Increase your debt
-Establish poor credit if not used wisely

Tips to Stay in Control of Your Credit Card
-Use only one credit card
-Shop for the best credit card
-Consider a secured card- a type of credit card that requires a cash collateral deposit
that becomes the credit line for that account
-Don’t charge anything you can’t pay for
-Pay your monthly bill on time and in full

Credit Card Warning Signs
It’s often easy to miss a payment due date or unknowingly build up an exorbitant amount of debt,
leaving you in bad standing with your credit card company. Be sure to actively track your
expenses and bills and watch out for warning signs of uncontrolled credit usage. This may take
the form of paying off one credit card with another or only making the minimum payment. If you
are having trouble making your credit card payments, call your credit card company, they may be
willing to work out a payment plan with you.

Alternatives to Credit Cards
If you are uncertain about getting a credit card, or want to adjust your credit usage, there are
some convenient alternatives, including cash, a debit card, a secured credit card, a prepaid card,
or a loan (for larger purchases).

Getting a Credit Card

There are many important elements to consider when reading a credit card offer. Every credit
card company is required to outline the fine print of their credit cards in what is called a Schumer
box. The Schumer box standardizes all the pertinent information you will need to know to
compare credit card offers.

Each Schumer box will include:

Fees
As with other bank cards, a credit card comes with several different types of fees. Some of the
most common fees include late fees, which are imposed when minimum payments are not paid
on time, and over-the-limit fees that are charged when you exceed the credit limit.

Interest Rate
This is the rate at which credit card companies charge you for using their card. Rates can vary
widely and range from 6% to 36%, depending on the credit institution and the borrower’s credit
history. You will not be charged interest if you don’t carry a balance on your card from month to
month and instead pay off your full credit card balance each month.

APR
An APR is offered by a credit card company as a single sum of the total price of borrowing
money. It is calculated on an annual basis and generally cannot be changed for the first 12
months unless it is a promotional or variable rate.

Grace Period
A grace period is the time you have before you’ll be charged interest on your purchases –
generally between 20 days to a month. To receive a grace period, you need to meet these two
conditions:
-Pay your new balance in full for the billing period
-Pay the balance in full before the payment due date

No grace period is given if you only make the minimum payment, meaning that you’ll be
charged interest on your future purchases starting on the date you make the purchase.

Tip: Easily compare credit offers through websites like NerdWallet, Bankrate,  MoneyTips ,
and Credit Karma.