Credit, Debt, and Credit Scores Explained
What is credit?
Credit is the amount of money that a company will lend to you.
What is debt?
Debt is the amount of credit that you have borrowed and still owe.
What does your credit score tell lenders about you?
Your credit score tells lenders about your payment history, credit utilization, credit history length, credit mix, and new credit.
What are four tips for using credit wisely?
1. Pay your bills on time. 2. Keep your credit card balances low. 3. Monitor and review your credit report regularly. 4. Limit the number of new credit applications you make.
What are three alternate ways of building up enough credit to get a credit card?
1. Becoming an authorized user on someone else's credit card account. 2. Applying for a secured credit card. 3. Taking out a credit builder loan.
What is a loan?
A loan is a type of credit where you receive a lump sum of money that you must repay over time with interest.
What is the principal?
The principal is the original amount of money borrowed in a loan, excluding any interest or fees.
What are assets?
Assets are things of value that you own and can be used to generate income, such as cash, investments, or property.
What is collateral?
Collateral is an asset that a borrower pledges to a lender as security for a loan. If the borrower fails to repay the loan, the lender can seize the collateral to recoup the amount owed.
What is installment credit?
Installment credit is a type of loan that is repaid in fixed monthly payments over a specific period of time.
What is noninstallment credit?
Noninstallment credit, also known as revolving credit, is a type of credit that does not have a fixed number of payments and can be repeatedly borrowed against and paid off.
What is revolving credit?
Revolving credit is a type of credit that allows you to borrow up to a maximum credit limit and make multiple, smaller transactions up to that limit. As you repay the borrowed amount, your available credit is replenished.
Answer:
Credit is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately, but promises either to repay or return those resources at a later date.
Explanation: