Millennials, What Do You Know About Credit ?, Money News


The concept of credit may seem like a modern day invention, but credit is believed to be as old as the invention of the wheel.

The earliest known example of credit occurred in Sumer (southern modern Iraq) 3500 BC. In 1800 BC, the first known laws regarding credit, the Code of Hammurabi, were written in Babylon.

In 50 BC, the philosopher Cicero of the Roman Republic wrote an account of his neighbor buying land through the use of credit.

Modern credit reporting, however, is believed to originate in England in 1803, involving a group of English tailors.

What is credit?

Do not despair if you are not quite sure about this term.

Simply put, credit is money borrowed from banks and financial institutions that is repaid later, which normally includes both interest and principal.

This contrasts with debit, whereby goods and services are paid for with money you own or currently own.

An important advantage of paying by credit is the ability to pay for something that you might not otherwise be able to do.

For example, if you want to study at a university but don’t have the required tuition fees, you can take out student credit to finance your studies.

Today, credit is inseparable from our daily lives and we often need it for large purchases.

If you intend to buy a car or a house, the most common option is to take out a loan from a bank.

Different types of credit products

There are two types of credit products: secured credit and unsecured credit. Secured credit is defined as a loan linked to a guarantee.


Collateral is property given as security for the repayment of a loan. If you fail to make the payment on time, the warranty will be forfeited.

Some examples of secured loans are auto loans, home loans, secured credit cards, and secured overdrafts.

Conversely, unsecured credit is money loaned that is not attached to a collateral.

Some examples of unsecured credit include home improvement loans, student loans, unsecured credit cards, and unsecured overdrafts.

When applying for credit, make sure you know what type of credit you are applying for.

Repercussions of bad credit behavior

After successfully obtaining credit, it is very important to ensure that the payment is made in full and on time.

If you don’t, late fees and interest will often be charged.


If there is an extended period of partial payments and late payments, you could incur debt that could very well get out of hand.

Additionally, if you are unable to make full and on-time payments, your credit payment records will be tainted.

This, in turn, will affect your credit score.

A bad credit rating will discourage credit lenders from granting you future loans.

Before taking out a credit card or taking out a loan, read the terms and conditions of your credit application.

Follow it closely to avoid incurring huge debt.

Benefits of exemplary credit behavior

On the other hand, there are multiple rewards and benefits of having good credit behavior.

In addition to not having to worry about accumulating debt, you are essentially building a positive credit reputation.

Banks and financial institutions often offer better than usual interest rates on credit applications to those with a positive credit rating.

Many credit card issuers often have a rewards program which can be very attractive.

It comes in the form of cash backs, vouchers, vacations, airline miles and more.


Now that you know what credit is, you might want to learn more about how to build a great credit reputation.

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