The Bottom Line on Borrowing

In this module, you have learned all about credit. You learned about the types of credit, the benefits of buying over time, and the costs of using credit. Remember that the convenience of credit can cause people to overspend which can have all kinds of effects, from financial to relationship to health problems.

Your credit rating is used by so many organizations to determine whether you are a good risk, from banks determining the interest rate they will charge you to landlords deciding whether they will rent to you to employers deciding whether to hire you. You need to actively protect your credit rating by reviewing your credit reports at least once a year and anytime you are denied credit. Your credit history and your FICO® score are your “report card” for using credit wisely or unwisely. It is vital to your financial health to have a good credit rating. A bad rating means you may have trouble getting credit when you need it, and you will have to pay more for any credit you do get with higher interest rates. You may even have to pay higher insurance rates and may have trouble finding a job!

The consequences of not using credit wisely are great. If you find yourself in trouble with credit or too much debt, you should get help immediately. Waiting too long can have serious consequences including bankruptcy. Bankruptcy has a very negative effect on your credit rating, and should be used only when all other options have been exhausted.

Credit is a part of our everyday lives in America, but it doesn’t have to be a stumbling block to your financial future. When used wisely, credit enables you to buy things that you need when you don't have the money for them. The better you get at using credit, the better your credit rating will become over time and the cheaper the cost of credit will be for you.

The lure of buying now and paying later is one of the most powerful impulses that you'll have to learn to master when you start getting credit. It takes almost no time to find yourself in a debt trap that may take years for you to escape. Resist the urge to buy and stick to your budget. It's good for you in so many ways.

Extend Your Learning

In the Pre-Assessment activity for the module, you wrote down five items a parent or guardian bought this year using credit. Based on what you learned in this module, do you think credit have been used in each situation? Why or why not? Discuss your thoughts with a coursemate.