By definition, credit is belief, confidence, good name and trustworthiness. Not surprisingly, the term “credit” is also used when it comes to borrowing money. When a business or company extends credit to you (i.e. money for you to borrow), they are doing so with the promise that the money will be paid back. Credit may come in the form of a revolving line of credit, such as a credit card or in the form of a loan.
To better understand the concept of credit, think about how you decide to share secrets. You share a secret with a friend because you have confidence that they won’t tell others. If you find they slip up, you may be a little weary of sharing more secrets with them. They have lost your trust.
When a business lends you money or provides you with credit, they are putting good faith in the fact that you will pay them back. As a student, you don’t have a long credit history, so the business is taking a chance on you. If you don’t pay them back on schedule – or at all- it will affect your ability to receive credit in the future - from that business and from others.
When you have “bad credit”, it can affect your ability to get a loan, a credit card, rent an apartment, or even get a job. That is why it is so important that you understand credit, learn about being smart with your credit card, and learn how to avoid identity theft – a crime that can hurt your credit report and therefore seriously affect your ability to access credit.