Unit 9 Competency 2: Demonstrate an understanding of the purpose and importance of credit-2

Suggested Objective a: Identify sources of credit

There are many different methods to pay for items. People can use cash. They can even use debit and credit cards. Checks are acceptable forms of payment. Look at the Pay Your Way Links to an external site. pdf. It explains various payment methods and where these methods can generally be used. Information is provided regarding the costs of using each method and how quickly the payment is processed. Security is an additional concern when thinking of payment options. This flyer will aid you with understanding the security option and whether a bank account is used. Click the Pay Your Way Links to an external site. link to learn more.

Credit and Debt

Who Uses Your Credit Score to Make Decisions about You – and Why Links to an external site. is a short article regarding who is looking at your credit score. Reasons are provided why others look at your credit score. For instance, if you wish to apply for a loan to buy a car, the lender will wish to see your credit score. This is to aid the lender with knowing if you are capable and likely to pay them the money owed in a timely manner. Your credit score determines what type of interest rate you are assessed when a loan is made. Click the link Links to an external site.for the article to see more on this topic.

You have viewed information on who uses a credit score. Now let's look at what a credit score is and how the score is derived. Look at Anatomy of a Credit Score Links to an external site. to learn the percentages that are used to make up your credit score. This is a very short article Links to an external site.with great links to other financial information.

Now that you know who uses your credit score and what determines your credit score, are you curious as to what an average credit score is? What information is not included in your credit score? What factors can damage your credit score? All of these questions can be answered in the short post Your Credit Score Questions Answered Links to an external site.. Click the link Links to an external site.to learn more.

If you decide to use credit cards, you need to learn to read the statement (bill) for the credit card when it arrives. Look at Decoding Your Credit Card Statement Links to an external site.to view a slideshow regarding the five areas of a credit card statement. You can also see information regarding summary of account activity. Click the link Links to an external site.to learn more.

Be careful when using credit cards. There are four common mistakes that people make when using credit cards. View Ask the Expert: 4 First-Time Credit Card Mistakes Links to an external site.. It relates in detail the four mistakes people make when choosing their first credit cards.

Applying for a card you won't qualify for.
Selecting a subprime offer.
Chasing rewards.
Falling for an in-person pitch.

Suggested Objective b: Compare types of credit

"Get to Know Types of Credit Links to an external site.

By John Ventura and Mary Reed from Managing Debt For Dummies

All credit is not created equal. There are many forms of credit available, and getting familiar with credit types can help you become a better credit consumer.

Secured: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. The lien entitles the creditor to take the asset if you don’t live up to the terms of your credit agreement. Car loans, mortgages, and home equity loans are common types of secured credit.
Unsecured: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.
Revolving: If your credit is revolving, the creditor has approved you for a set amount —your credit limit — and you can access the credit whenever you want and as often as you want. In return, you must pay the creditor at least a minimum amount on your account’s outstanding balance each month. Credit cards and home equity lines of credit are examples of revolving credit.
Installment: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages, car loans, and student loans."

Copied from http://www.dummies.com/how-to/content/get-to-know-types-of-credit.html Links to an external site. on October 24, 2014.

Understanding the Different Types of Credit Links to an external site.

Suggested Objective c: Compute cost of using and extending credit

Using credit costs money. How much it costs depends on the type of credit you are using and many other factors. Look at the sites below for more information.

The Cost of Using Credit Links to an external site.

Credit Basics I Links to an external site.

The Costs of Credit Links to an external site.from EconEdLink

The True Cost of Credit Card Purchases Links to an external site. from Practical Money Skills

The True Cost of Credit Brought to You by LendUp Links to an external site.