Credit is the ability to borrow money or access goods or services with the understanding that youll pay later. It is a contractual agreement between a borrower and a lender, where the borrower receives a sum of money or something else of value and commits to repaying the lender at a later date, typically with interest. Credit can also refer to an individuals or a businesss creditworthiness.

Credit can be extended by a creditor, also known as a lender, to a debtor, also known as a borrower. The resources provided may be financial, such as granting a loan, or they may consist of goods or services, such as consumer credit. Credit encompasses any form of deferred payment.

Credit is important because it allows individuals and businesses to make purchases and investments that they may not be able to afford upfront. Good credit is necessary if you plan to borrow money for major purchases, such as a car or a home, and can also mean better interest rates and terms on loans and credit cards.

Creditworthiness is a term used to describe a borrowers ability to pay back credit and loans, based on factors such as credit history and activity. Lenders judge creditworthiness in many different ways, and they may use things like credit reports and credit scores to help.

Credit comes in different forms, including revolving credit and installment credit. Revolving credit, such as credit cards, allows borrowers to borrow up to a certain limit and pay back the borrowed amount over time, with interest. Installment credit, such as car loans and mortgages, involves borrowing a specific sum of money and repaying it, plus interest and fees, in a series of equal monthly payments over a set period of time.

In summary, credit is the ability to borrow money or access goods or services with the understanding that youll pay later, and it can refer to both lending and a borrowers creditworthiness. Credit is important because it allows individuals and businesses to make purchases and investments that they may not be able to afford upfront.