What is credit?

Question: 

 What is credit?

Answer: 

Credit is when an item (or money) is received in exchange for a promise to pay a definite sum of money at a future date. In simple terms, credit refers to borrowing. You could use credit to purchase expensive items that you can’t pay for all at once such as an automobile, a house, or even an education. Of course, when you borrow money you must pay that money back and usually, you must pay interest on that money as well. In the case of credit, interest is the charge from the lender for borrowing their money. Read the Welcome to the… Credit Card? article to learn more about one type of credit: credit cards. I would also recommend reading the Credit History, Credit Report… What is the Difference? article to learn how lenders use your credit history to determine if they will grant you credit or not.

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