What is Credit?

Information on Credit Cards


Credit is person's reputation as a borrower. It tells others how likely a person is going to repay their loans. Credit is made up of a person's information about their borrowing history. In other words, credit means to borrow money from a lender, someone who allows you to borrow money from them, with the understanding of paying them back.

Credit has many forms that a person can use like personal loans, credit cards. Personal loans are loans that people use for personal use like buying a house, car, or even going on a vacation. These personal loans are either good credit or bad credit, meaning that person should use their credit for important things. Also, credit cards play a major role in building up credit for it allows consume's to buy things without using cash. Credit cards are plastic cards issued by a person's bank which allows the holder to purchase goods and services on credit.

When through there are many befits in using credit like building a good credit history for yourself. There are also many costs that come from credit like fees and debt, but probably the most important cost is the interest (APR) that comes with it. Interest (APR) is the rate that is charged for borrowing money. The interest that someone pays is based on a person's creditworthiness. Creditworthiness a person's reliability to pay back a loan. It is determined by a person's character, capacity, and capital.

Determining a person's credit is based on their credit score, a number assigned to a person that indicates to lenders their capacity to repay a loan. This score is gathered by the credit bureau who collects information on consumer’s credit and sells it. The credit bureau shows lenders your credit report, a detailed report of an individual's credit history. Credit scores range from 300 to 850, meaning the higher the score the better the interest and credit a person receives.

Vocabulary Watch

Credit Cards

Credit cards are plastic cards that were issued by person's bank, which allows them to borrow money from their bank to buy products and services with the understanding of paying back. This card becomes your money for it allows a person to borrow money from their bank to purchase items that they can't afford right now. Credit cards are very useful, but each one use a credit limit, the maximum amount a credit card company will allow someone to borrow from a single card. In addition some credit cards come with an annual fee, a certain amount of money a person must pay to be able to use the companies credit cards.

These plastic cards can be used to purchase almost everything. Credit cards can be used in stores in wherever they accept credit. Credit cards have become very useful in this day in age for it allows people to purchase items that they can't afford right now, but eventually they will have to pay it back.

There are many benefits in using a credit card like building up a person's credit history and making it easier to purchase items. Also each credit card comes with their own rewards like purchasing tickets early or getting cash back. Even though there are great rewards, there is also costs with using credit cards. One cost is interest rate (APR) for it is the proportion of the loan that is charged as interest. Another cost is penalty fees, which are fees that are charged to the borrower if they paid the fee late. In addition, there is another fee called over-the-limit fee, where they fine a person for going over their credit limit.

Smart Consumers


  • Pay off your balance every month
  • Use the credit card for necessary things
  • Don't miss a payment
  • Stay on budget
  • Do not go over limit