Understanding Credit

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What is credit?

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Credit is the ability to borrow money or access goods or services with the understanding that you'll pay later.

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What is a credit score?

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A credit score is a numerical representation of a person's creditworthiness, based on their credit history.

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What factors influence credit scores?

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Factors include payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.

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What is a credit report?

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A credit report is a detailed account of an individual's credit history, including loans, credit cards, and payment history.

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What is an interest rate?

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An interest rate is the percentage of a loan amount that a lender charges for borrowing money.

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What is an auto loan?

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An auto loan is a type of loan specifically used to purchase a vehicle.

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What is revolving debt?

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Revolving debt is a type of credit that allows the borrower to use and repay funds repeatedly, such as credit cards.

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What is a scholarship?

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A scholarship is a financial award given to a student to help pay for education, which does not need to be repaid.

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What is the difference between secured and unsecured loans?

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Secured loans are backed by collateral, while unsecured loans are not and are based solely on the borrower's creditworthiness.

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What does it mean to default on a loan?

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Defaulting on a loan means failing to repay the loan according to the agreed terms.