Credit
BeginnerCredit is the ability to borrow money or buy goods and services now, with an agreement to pay later. It also describes the trust a lender places in a borrower to repay.
When a shop lets you take goods and pay at the end of the month, or a bank lets you borrow up to a limit on a credit card, you are using credit. The lender is trusting that you will pay back what you owe, usually with interest.
Credit comes in two broad forms. Instalment credit, such as a car loan or mortgage, involves borrowing a fixed amount and repaying it in regular instalments. Revolving credit, such as a credit card or line of credit, lets you borrow repeatedly up to a limit, repay and borrow again.
Your access to credit depends on your creditworthiness: how likely lenders believe you are to repay. They judge this from your income, existing debts and credit history, often summarised in a credit score. Good credit usually means easier approval and lower interest rates.
Used carefully, credit can help spread the cost of large purchases and build a positive credit record. Used carelessly, it can lead to expensive debt.
The word "credit" also has a separate meaning in bookkeeping, where it is the right-hand entry in an account and the opposite of a debit. That meaning is explained in the Debit entry.
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