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Learn of credit and it's importance, learn new formulas to calculate finance charge, amounts financed, deferred payment price, and more. Lots of the things in this chapter relates to real life.
Hopefully have gotten better in sight on making large purchases

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Building credit can be tricky. If you don't have a credit history, it's hard to get a loan, a credit card or even an apartment.

But how are you supposed to show a history of responsible repayment if no one will give you credit in the first place?

To have a FICO score, for example, you need at least one account that's been open six months or longer, and you need at least one creditor reporting your activity to the credit bureaus in the last six months. (A VantageScore, from FICO's biggest competitor, can be generated more quickly.)

Several tools can help you establish a credit history: secured credit cards, a credit-builder loan, a co-signed credit card or loan, or authorized user status on another person's credit card.

Whichever you choose, make sure you use it in a way that will eventually earn you a good credit score.

" SIGN UP: Get your free credit score and track your progress

Five ways you can establish credit

1. Apply for a secured credit card

If you're building your credit score from scratch, you'll likely need to start with a secured credit card. A secured card is backed by a cash deposit you make upfront; the deposit amount is usually the same as your credit limit.

You'll use the card like any other credit card: Buy things, make a payment on or before the due date, incur interest if you don't pay your balance in full. Your cash deposit is used as collateral if you fail to make payments.

You'll receive your deposit back when you close the account.

Secured credit cards aren't meant to be used forever. The purpose of a secured card is to qualify for a card without a deposit.

Secured credit cards aren't meant to be used forever. The purpose of a secured card is to build your credit enough to qualify for an unsecured card - a card without a deposit and with better benefits. Choose a secured card with a low annual fee and make sure it reports to all three credit bureaus, Equifax, Experian and TransUnion.

NerdWallet regularly reviews and ranks secured credit card options.

2. Apply for a credit-builder loan

A credit-builder loan is exactly what it sounds like - its sole purpose is to help people build credit.

Typically, the money you borrow is held by the lender in an account and not released to you until the loan is repaid. It's a forced savings program of sorts, and your payments are reported to credit bureaus. These loans are most often offered by credit unions or community banks; at least one lender offers them online.

3. Get a co-signer

It's also possible to get a loan or an unsecured credit card using a co-signer. But be sure that you and the co-signer understand that the co-signer is on the hook for the full amount owed if you don't pay. (See "What You Need to Know About Co-signing.")

4. Become an authorized user on someone else's credit card

A family member or significant other may be willing to add you as an authorized user on his or her card. As an authorized user, you'll enjoy access to a credit card and you'll build credit history, but you aren't legally obligated to pay for your charges.

Find out whether the card issuer reports authorized user activity to the credit bureaus.

Ask the primary cardholder to find out whether the card issuer reports authorized user activity to the credit bureaus. That activity generally is reported, but you'll want to make sure - otherwise your credit-building efforts may be wasted.

You should come to an agreement on how you'll use the card before you're added as an authorized user. If the primary cardholder expects you to pay your share, make sure you do so even though you aren't legally obligated.

5. Get credit for the rent you pay

Rent-reporting services such as Rental Kharma and RentTrack take a bill you are already paying and put it on your credit report, helping to build a positive history of on-time payments. Not every credit score takes these payments into account, but some do, and that may be enough to get a loan or credit card that firmly establishes your credit history for all lenders.

Build your score with good habits

Building a good credit score takes time, probably at least six months of on-time payments.

Practice these good credit habits to build your score and show that you're creditworthy:

1. Make 100% of your payments on time, not only with credit accounts but also with other accounts, such as utility bills. Bills that go unpaid may be sold to a collection agency, which will seriously hurt your credit.

2. Keep your credit utilization low - utilization is your balance when compared to your limit. We recommend paying in full each month, but if do you carry a balance don't let it exceed 30% of your credit limit.

3. Avoid opening too many new accounts at once; new accounts lower your average account age, which makes up part of your credit score.

4. Keep accounts open for as long as possible. Unless one of your unused cards has an annual fee, you should keep them all open and active for the sake of your length of payment history and credit utilization.

5. Check each of your credit reports annually for errors and discrepancies.

Learn how to check your credit scores and reports

A credit report is a record of how you've used credit in the past. Your credit scores estimate how you'll handle credit in the future, using the information in your credit reports. You'll want to monitor both to watch for errors and to see your credit-building efforts pay off.

Credit reports show how you've used credit in the past. Scores use that data to estimate how you'll handle credit in the future.

Several personal finance websites, including NerdWallet, offer a free credit score. Look for a site that also offers free credit report information, as well as educational tools such as a credit score simulator.

Several credit card issuers print FICO scores on customers' monthly statements and allow online access as well. Some card issuers offer free scores to anyone, cardholder or not: Discover offers a free FICO score at CreditScorecard.com, while Capital One offers a free VantageScore at its CreditWise website.
Updated Sept. 26, 2017.

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Building credit can be tricky. If you don't have a credit history, it's hard to get a loan, a credit card or even an apartment. But how are you supposed to show a history of responsible repayment if no one will give you credit in the first place?

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Revolving charge accounts give consumers close ended credit

Flase

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Paying the loan minimum meets the standards but will take a huge sum of time

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Paying the loan minimum meets the standards but will take a huge sum of time

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The largest amount of an installment loan interest is charged during the _____ part of the loan 

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The largest amount of an installment loan interest is charged during the _____ part of the loan 

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earlier

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Annual Percentage Rate (APR) and effective APR | Finance & Capital Markets | Khan Academy

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A good credit score can result in lower loan terms which can save lots of money.

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The act requires that creditors inform customers of the finance charge and the annual percentage rate.
The purpose is to ensure that the consumer is aware of the cost of credit.

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The process of paying off an installment loan in a series of equal payments, of both principal and the interest.

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Calculating average daily balance and finance charge

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Calculating average daily balance and finance charge

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Step 1. | Calculate the daily balance or amount owed at the end of each day during the billing cycle:
Step 2. | When the daily balance is the same for more than 1 day, multiply it by the number of days the daily balance remained the same, or the number of days of the current balance. This gives a cumulative daily balance.
Step 3. | Add the cumulative daily balances.
Step 4. | Divide the sum of the cumulative daily balances by the number of days in the billing cycle.
Step 5. | Finance charge = Rate per month × Average daily balance.
Step 6.* | New balance = Previous balance + Cash advances + Purchases − Payments − Credits + Finance charge

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(what's actually borrowed.)

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total finance charge=total of all monthly payments-amount financed.

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The APR represents the true or effective annual interest creditors charge. This is helpful to buyers who repay loans over different periods of time

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Deferred Payment Price= Total of Monthly Payments + Down Payment

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Finance charge + Amount financed/Number of loan payments = Monthly payment due

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Finance charge/Amount financed x 100= Table Look up number

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Amount financed= Cash Price- Down Payment

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How Credit Card Interest Works: The Math

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Personal Finance Math 3: Calculating Credit Card Finance Charges Part 2