The Three C's
When you go to the bank to apply for credit, there are three things they will look at.
Those are the three c's of credit: character, capacity, and capital.
Those are the three c's of credit: character, capacity, and capital.
Character: Character is your credit history. When you apply for credit, the bank will look at your past history with credit and debts.
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Capacity: Next the bank will look at your income. They need to know if you will be able to pay back your loans or debts based on your money.
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Capital: This is more what you own than your money. The bank will see if you have a house or if you have a job.
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Private Label and General Purpose Cards
When you go to a store and buy something, using credit, then you will either use a private label card or a general purpose card. General purpose cards can be used almost anywhere. Private label cards can only be used for certain stores.
General Purpose Cards: The first picture is of general purpose cards. These are the cards you get from a bank. You can use these probably anywhere that credit cards are accepted.
Private Label Cards: The second picture shows a few different private label cards. These are cards you get from different businesses that can only be used at those places. For example, you could use the Walmart card at any Walmart but not at Target or a different business.
Private Label Cards: The second picture shows a few different private label cards. These are cards you get from different businesses that can only be used at those places. For example, you could use the Walmart card at any Walmart but not at Target or a different business.
Cash vs Credit
Cash
Paying in cash is easy, when you are buying something that isn't that expensive. But, buying a candy bar with cash and buying a house with cash are two different things. With cash, it can be harder to buy an item with a higher price tag. But if you've never used credit in your life, then it can be very hard to suddenly start. That's because you won't have a credit score yet.
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Credit
Credit would be considered more efficient than cash. You can buy something with a simple swipe, but wouldn't that make it easier to go into debt? Did you know that whenever you purchase something with credit that a certain percentage of that money goes to the bank? That's why most gas stations have two different prices, if you pay with cash they get the same amount of money as they would with credit. But, cash is cheaper.
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So which is better? That is your opinion, but personally I think it's better to have
both. Credit and cash both have downsides but they even each other out. But, some
people will chose just one(cash or credit).
both. Credit and cash both have downsides but they even each other out. But, some
people will chose just one(cash or credit).
Credit History
Credit history is important. If this is your first credit card then you won't have a credit history. So what do you do? Well, you can share the credit card with someone who has a credit history, and a good one. This is called a cosigner.
Bad Credit History
When you first start out, it can be very easy to get bad credit. If you miss a payment in the very beginning, your credit score will drop. But, if you've paid all your payments on time and suddenly you miss a payment after twenty years, your credit score won't drop as much. Never have a cosigner with someone who has bad credit. You most likely won't get the credit card that way.
Credit Cards
-A credit card will have a credit limit. This is the maximum amount of credit on your card. Which means you shouldn't try to spend your credit limit each month. Chances are your credit limit is much more than you can afford to pay. So make a budget instead. Make sure it is at a price you will be able to pay off.
-Keep track of how much you spend each month. Never go over your budget! Save all of your receipts so that you know how much you have been spending.
-Once you reach or get close to your budget, STOP SPENDING! Don't use your credit card if you know you won't be able to pay the company back.
-If you can't pay the whole bill, pay as much as you can and not the minimum amount each month. But, make sure you pay your bills on time to avoid late fees and to protect your credit history.
Loans
Type of loans:
-Home loans are for when you are buying a house.
-Home improvement is for when you need to make improvements on your house; increasing the value.
-Vehicle loans are for purchasing a new or used vehicle.
-Personal line of credit is a loan you can used anytime after it is approved, but you can't take more money than agreed on from the loan.
-Education or student loans are to pay for higher education.
-Home loans are for when you are buying a house.
-Home improvement is for when you need to make improvements on your house; increasing the value.
-Vehicle loans are for purchasing a new or used vehicle.
-Personal line of credit is a loan you can used anytime after it is approved, but you can't take more money than agreed on from the loan.
-Education or student loans are to pay for higher education.
Consumer Finance Companies
If you don't already know, people with bad credit history won't qualify for credit. So where do you get credit? Well, you go to a consumer finance company. Most of the time they will charge more for loans than most banks do. This is because they must borrow the money they lend you from somewhere else, which includes them paying interest as well.
Private Loans
Private loans are not through a bank. Sometimes, when people need a lot of money, they
will ask friends or their family for money. If you do this, always make sure you pay them back!
will ask friends or their family for money. If you do this, always make sure you pay them back!
Tips!
-Make sure you keep the loan as small as you can make it. This way it'll be easier to pay them back and you will be able to still pay your other expenses.
-Prove that you can pay them back, and work out a certain way to do it with them, like figuring out how much you will pay them each month.
-Inform the lender about any problems. If you will be missing a payment, let them know!
-Keep a record of your payments to prove you paid the loan.
-Prove that you can pay them back, and work out a certain way to do it with them, like figuring out how much you will pay them each month.
-Inform the lender about any problems. If you will be missing a payment, let them know!
-Keep a record of your payments to prove you paid the loan.
Balloon Payment Clause
If you ever buy a car or a new TV, most likely you won't pay the exact amount it cost in that very day. Usually, you will be able to pay over the course of a certain amount of months. Now, here's a tip: NEVER PAY THE MINIMUM! If you only pay the minimum amount each month, you will probably end up having a balloon payment. This is when you don't end up paying the right amount of money each month and so your final payment is whatever amount you have left to pay. ALWAYS pay more than the minimum!