What is credit ? How does credit play a vital and positive role ? Explain with an example (2024)

FAQs

How does credit play a vital and positive role? ›

Credit plays a vital and positive role in following ways: (i) Credit helps people in meeting the ongoing expenses of production. (ii) It also helps people to complete tasks in given period of time. (iii) It helps people to earn more profits. (iv) By earning profits, the standard of living of people rises.

Credit is a relationship between a borrower and a lender. The borrower borrows money from the lendor. The borrower pays back the money at a later date along with interest. Most people still think of credit as an agreement to buy something or get a service with the promise to pay for it later.

The Role of Credit for Development plays a very important role in the growth and development of a country and hence it should be made available at affordable rates. The availability of an easy rate of credit is the first step towards an economically sound nation.

Credit allows companies access to tools they need to produce the items we buy. A business that couldn't borrow might be unable to buy the machines and raw goods or pay the employees it needs to make products and profit. Credit also makes it possible for consumers to purchase things they need.

Having credit enables consumers to buy goods or assets without having to pay for them in cash at the time of purchase. Having a good credit record means that a person has an established history of paying back 100% of his/her debts on time.

Good credit management leads to higher credit scores, which in turn lowers your cost to borrow. Living within your means, using debt wisely and paying all bills—including credit card minimum payments—on time, every time are smart financial moves.

There are many different forms of credit. Common examples include car loans, mortgages, personal loans, and lines of credit. Essentially, when the bank or other financial institution makes a loan, it "credits" money to the borrower, who must pay it back at a future date.

Credit can be a powerful tool in achieving important financial goals. It allows you to make large purchases (such as a home or a dental practice) that you otherwise would not be able to afford if you were paying in cash.

Credit is the ability of the consumer to acquire goods or services prior to payment with the faith that the payment will be made in the future. In most cases, there is a charge for borrowing, and these come in the form of fees and/or interest.

Good credit can be the make-or-break detail that determines whether you get a mortgage, car loan or student loan. Bad credit, on the other hand, will make it difficult to get a credit card with a low interest rate and more expensive to borrow money for any purpose.

What role does credit play in your financial life? ›

Your score not only affects your ability to buy a house, a car or obtain credit cards, it is also used by a landlord in qualifying you as a potential renter, setting your insurance premiums and can be a factor in your getting hired.

Credit represents an agreement to receive goods, ser- vices or money now and pay for them in the future. Only you can decide how to spend your money and whether you will use credit. These decisions should be based on your ability to repay credit debt, not just on what you want to buy at the moment.

Credit plays a vital and positive role in the following ways: It helps people from all walks of life in setting up their business increase their income and provide support to their family needs. It makes it possible for the people to own or construct their own house and get relief from monthly rent.

1. Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores.

(i) Credit helps people from all walks of life in setting up their business, increase their income and support their families. (ii) To some people, loan helps a lot in constructing their houses and get relief from monthly rent. (iii) To others, it helps a lot in raising their standards.

You can enjoy using something you need as you pay for it. Get something you can't afford now. If you can't af- ford to pay cash for a car or other large purchase, using credit allows you to get it now. May get better service on something bought on credit.

Credit can be a powerful tool in achieving important financial goals. It allows you to make large purchases (such as a home or a dental practice) that you otherwise would not be able to afford if you were paying in cash.

Good credit can signify that your financial situation—and the rest of your life—is on the right track. This means your credit score can affect your insurance rates, what apartment you'll be approved for, and perhaps even whether you get that new job.