Credit

What is credit?

In simple terms, Credit is the act of someone lending you money now on the basis that you will repay from future income.

Credit is the provision of resources (such as granting a loan) by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt, and instead arranges either to repay or return those resources (or material(s) of equal value) at a later date. The first party is called a creditor (also known as a lender), while the second party is called a debtor (also known as a borrower).

There are a numerous types of credit out there and they’re not just limited to finance- if you get a product on a ‘buy now, pay later’ scheme, this counts as a form of credit.


Q: Why is credit used?

A:People take out credit for a variety of reasons; it can be used to make purchases that you might not have the money to cover right away, or they may just prefer to spread the costs over longer period to ease the financial burden of paying for something upfront.

When most people think of credit they might think of credit cards, mortgages or car finance but more recently buying a phone on contract has become a popular form of credit.

Q: Can you get credit without a credit card?

A: Yes. A credit card is not needed to take out other forms of credit, though using it responsibly can make you more appealing to other lenders.

Q: Will I be accepted for credit?

A: Each lender will have different criteria for their products, so it’s impossible to say for certain whether or not you’ll be accepted for every form of credit that you apply for. For your best chances of acceptance, you should always check your Credit Report before you apply.

If you haven’t already, you can try checkmyfile FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time online. You’ll get complete access to the UK’s most detailed credit report, with data from four Credit Reference Agencies, not just one.

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Jargon Buster

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