Making Borrowing Decisions

Borrowing can be a risky and costly proposition. However, it can be a powerful tool for achieving your financial goals when used wisely. The concept of credit is simple:  you borrow money from a lender today, with the promise to repay it later, plus interest. The lender’s decision to extend your credit is based on their assessment of your creditworthiness. This assessment considers your income, debt-to-income ratio, and payment history.

You can borrow money at lower interest rates with a good credit score. This can save you a significant amount of money over the long term. There are many types of credit, including credit cards, student loans, and mortgages. Each type of credit has its benefits and drawbacks. Understanding the different kinds of credit before you start borrowing is essential.

This chapter aims to empower you with the skills to manage your credit successfully, such as building a credit history in early adulthood, reading your credit report, and improving your credit score. It also explores using credit responsibly and establishing a personal debt limit.

Source: Florida State College at Jacksonville, https://fscj.pressbooks.pub/financialliteracy/chapter/making-your-borrowing-decisions/
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