By: Kelly Murphy
The Basics of Credit
Credit is the ability to borrow money in return for a promise of future payment. It is like you buy now, but pay later. There are many different types of credit: loans, credit card, house, car, and school. There is not a fee for credit but there is an annual percentage interest (APR) that you must pay. What determines if you can get interest is if you have creditworthiness. That means are you reliable to pay back a loan. A lender judge this by three things character, capacity, and capital. A credit report will show your past history and your past borrowing/repaying. They can tell by your credit score which shows them who qualifies for a loan, at what interest rate, and what credit limits. These credit scores will be reported to the credit bureau, to make them available to credit card companies. You can also get a personal loan by building integrity and its granted for personal use.
Capacity: financial ability to repay a loan.
Capital: value of what you own.