Practice Ways to Build Credit

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A _________________ requires a cash deposit as collateral. When you open an account with the creditor/lender, you provide a deposit of money. The deposit determines your credit limit (the amount of credit you can use). For example, if you deposit $500, your credit limit will be $500. You can make purchases up to that amount. If you default, the creditor/lender takes control of your deposit.

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secured credit card

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A person with no or poor credit can obtain a loan with a lower APR (interest rate) if someone with good credit agrees to act as a _____________________. The person with good credit promises to repay the loan if the primary borrower defaults. This arrangement does carry a risk for the person with good credit because they are responsible for paying the lender if the borrower cannot.

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cosigner

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An ___________________ allows you to borrow an amount of money for a specific amount of time.  There is a fee for borrowing the money (apr). The borrowed money and interest are paid back monthly and the payment amount is the same each month.

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installment loan

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If you are made an ____________________ you are allowed to make purchases you are added to someone’s credit card account. You are able to use their credit card, but you are not legally responsible for repaying the debt. When the card is used and payments made responsibly, the credit score of the cardholder and you is improved.

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authorized user

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A ____________________lets you buy things with borrowed money. The creditor allows you to borrow up to a certain amount called a credit limit. When you borrow money, you agree to pay it back later. If you don’t pay it all back at once you’ll have to pay extra money called interest (apr). If you don’t manage it well, you might end up owing more month than you can pay back.

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credit card

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A _____________________ allows you to make fixed monthly payments to the principal and interest to a creditor. The creditor puts your money into a savings account and gives you access to the money and some of the interest your money gained when you make the final payment. This is a safe way to build credit.

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credit building loan

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A ____________________allows you to borrow a large amount of money for a specific amount of time. There is a fee for borrowing the money (apr). You can get approved for money with a lower interest rate (apr) if you provide an asset as collateral. Collateral can take the form of a savings account or property if you’re unable to repay the borrowed amount the creditor will take the collateral.

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secured loan