Credit and Debt

Money talks

This page includes information on credit scores and different types of debt (credit cards, mortgages, car loans, payday loans). This is not an exhaustive list of resources; consult a financial professional if you need more help.

What is credit?

Credit is borrowed money that you can use to purchase goods and services. You get credit from a credit grantor, whom you agree to pay back the amount you spent, plus applicable finance charges, at an agreed-upon time.

Grantors review credit applications & credit reports to determine the financial risk of giving you credit. They consider income, how long you’ve lived at your current address, how long you’ve worked for the same employer, what assets you have and the balances of your bank accounts.

Using Credit: When you are extended a line of credit, use it carefully. Check your credit report once a year to ensure accounts are being reported correctly. Most importantly, make your payments on time.

Main Types of Credit

Revolving credit: Most credit cards are revolving credit. You are given a credit limit and can make charges against that limit, carrying a balance and making payments each month.

Charge cards: While they look like revolving credit cards and are used the same way, charge cards differ in that you must pay the total balance each month.

Service credit: Service provider agreements are credit arrangements. You receive goods (electricity, etc.) or services (apartment rental, etc.), agreeing to pay them each month just as you would with another type of credit. Unpaid bills are almost always reported if an account is turned over to a collection agency.

Installment credit: Examples are car loans and mortgages. A creditor loans you a specific sum of money, and you agree to repay the money and interest in regular installments of a fixed amount over a set period of time.

Sources: Experian Credit Education and US Bank Financial Genius

Credit Cards

Credit cards allow you to borrow money from your bank to make purchases. If the money is not repaid in a designated time period, you have to pay interest.

Credit Scores

A credit score is a three-digit number determined by your credit history. Lenders and other companies use your credit score to help determine whether to extend you lines of credit, etc.

Credit Score & Credit Reports

Inaccuracies & Identity Theft

Car Loans

Car loans are a way for you to purchase a new or used vehicle. The loan is paid back over time, usually with interest.

Mortgages

A mortgage is a loan used to purchase a home, where the property serves as the borrower’s collateral.

Renting vs. Owning

Mortgage Calculators

Rental Scams

Housing Assistance Programs

Payday and Title Loans

These small, short-term, high-rate loans come at a very high price; research other alternatives before resorting to a title or payday loan.

The federal Truth in Lending Act treats payday loans like other types of credit: the lenders must disclose the cost of the loan. Payday lenders must give you the finance charge (a dollar amount) and the annual percentage rate (APR — the cost of credit on a yearly basis) in writing before you sign for the loan.

Source: consumer.ftc.gov

Payday loans are short-term loans, generally for $500 or less, that are typically due on your next payday.

Car title loans are loans for a small amount of money for a short time. To get a car title loan, you give the lender the title to your vehicle.

rev 7/17

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