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Chapter 7 Buying Decisions

Chapter 7 Buying Decisions. Where Can Consumers Get Credit?. Credit is the ability to borrow money and pay it back later. Service credit Credit cards Store accounts Charge cards Consumer loans Lines of credit. 7-2 Getting Started with Credit. Installment Payment Plan.

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Chapter 7 Buying Decisions

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  1. Chapter 7 Buying Decisions

  2. Where Can Consumers Get Credit? Credit is the ability to borrow money and pay it back later. • Service credit • Credit cards • Store accounts • Charge cards • Consumer loans • Lines of credit 7-2 Getting Started with Credit Slide 2

  3. Installment Payment Plan Installment credit is used to finance a high-priced item with a series of equal payments made over a set period of time. Amount borrowed $1,200.00 Annual rate of interest 16% Number of monthly payments 36 Amount of monthly payment (including both principal and interest) $42.19 Total amount to be repaid (36 payments of $42.19) $1,518.84 Total interest paid for the loan $318.84 Installment Plan for a Refrigerator 7-2 Getting Started with Credit Slide 3

  4. What Are the Benefits of Credit? • Convenience and rewards • Pay one bill each month • Get points or bonuses • Increased spending power • Records and protection 7-2 Getting Started with Credit Slide 4

  5. Focus On . . . What’s in a Credit Report? • A credit report is a statement of your credit history: your borrowing and repayment performance. • It helps creditors determine your ability to pay new debt. • It is issued by a credit bureau. • It can affect your financial future. • You have a right to see your report. 7-2 Getting Started with Credit Slide 5

  6. Success Skills Managing Your Credit Score • Your credit score (FICO) is compiled on a point system. • It is calculated based on five categories: payment history, amounts owed, length of credit history, new credit, and types of credit. • An excellent score is in the 700-850 range. • You can improve your score. • Examples: pay debts promptly, pay more than the minimum, reduce amount owed 7-2 Getting Started with Credit Slide 6

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