credit, up a state of being in credit

credit, in?The state of
being ‘in credit’ is simply having a positive amount of money, as opposed to being in debt (sometimes ‘in
debit’). It is possible to build up a state of being in credit wherever there is an account of
some sort. For example with a standard utility account, if too much money is
paid into the account, the utility company might hold the amount in credit
rather than pay it back, as it will count towards the following payment. This
is likely to happen when the customer pays a fixed amount each month even
though the amount of the utility varies from month to month; there could also
be periods where the customer is in debit for the same reason. A bank account
being in credit means that it is not in overdraft, that is, the amount is
positive.

credit card?Physically,
the credit card is a plastic card linked to a financial account. When the owner
of the card makes a purchase for products or services with it, the relevant amount is
paid to the supplier and the card owner’s account is debited by the same
amount. With most credit cards, the owner then has a period over which the debt can be repaid
without earning interest,
but after this period, interest will be charged on an ongoing basis. The
contract will usually include a minimum payment, which will typically be a
percentage of the outstanding
balance and
which must be paid each month. Since the minimum payment is much smaller than
the outstanding balance (often around 10% of it), it is possible to build up
large amounts of debt on a credit card, up to the maximum allowed by the credit
card issuer which will in turn be calculated by personal status and credit rating. Once the
limit is reached, attempts at purchasing with the credit card will be declined.
The advantage of a credit card is that it is a way of paying for items quickly
and securely, for use while online or phone shopping, or for buying things
without having the money available (or withdrawing cash from ATMs, for
example). However this convenience comes at a cost, as credit cards usually
charge high rates of interest compared with a standard loan or overdraft
facility.

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credit rating, credit score?A credit rating is a score
given by a credit
rating agency with reference to an individual’s or an
organisation’s creditworthiness.
The better a party’s rating, the more likely they are to: (a) get credit at all; (b) get credit
at a better rate of interest;
or (c) get credit above a certain amount. One’s credit rating will determine
the size of a mortgage
or loan one can
take on. Factors taken into account include one’s history of debt, one’s
history of non-payment of bills or other debts, criminal records, income and
expenditure, but other factors such as where one lives might also be used as
evidence of good or bad creditworthiness.

credit rating agency?A company that analyses a
person’s financial circumstances and history in order to provide a potential
lender with enough information to determine whether the applicant is safe to
lend money to. Credit rating agencies do not ‘pass’ or ‘fail’ applicants – they
merely give a credit
rating or a credit score to the potential lender who will use
this information to determine whether or not to lend, and if so, what interest
rate should be charged, all based on the lender’s perception of risk of default
presented by the applicant. Credit rating agencies can also provide ratings for
entire countries based on, for example, their governments’ policies and
deficits.

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