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Encyclopedia > Credit (finance)

Credit as a financial term, used in such terms as credit card, refers to the granting of a loan and the creation of debt. Any movement of financial capital is normally quite dependent on credit, which in turn is dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds. Finance studies and addresses the ways in which individuals, businesses and organizations raise, allocate and use monetary resources over time, taking into account the risks entailed in their projects. ... Credit cards An array of various credit cards. ... It has been suggested that Lenders be merged into this article or section. ... Debt is that which is owed. ... Financial capital, or economic capital, is any liquid medium or mechanism that represents wealth, or other styles of capital. ... A credit report summarizes historical financial information collected to determine an individuals or an entitys credit worthiness, that is, the means and willingness to repay an indebtedness. ...


A similar usage is in commercial trade, where credit is used to refer to the approval for delayed payments for goods purchased. Sometimes if a person has financial instability or difficulty, credit is not granted. Companies frequently offer credit to their customers as part of the terms of a purchase agreement. Organizations that offer credit to their customers frequently employ a credit manager. A fruit stand at a market. ... A credit manager is a person employed by an organization to make credit decisions concerning terms of payment to their customers. ...


Credit is denominated by a unit of account. Unlike money (by a strict definition), credit itself cannot act as a unit of account. However, many forms of credit can readily act as a medium of exchange. As such, various forms of credit are frequently referred to as money and are included in estimates of the money supply. Definition A unit of account is a standard numerical unit of measurement for the market value of goods, services, and other transactions. ... An example of Money. ... A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system. ... The examples and perspective in this article or section may not represent a worldwide view. ...


Credit is also traded in the market. The purest form is the "Credit Default Swap" market, which is essentially a traded market in credit insurance. A credit default swap represents the price at which two counterparties will exchange this risk — the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point being 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (i.e., is made whole). A physical marketplace in Portugal enables buyers and sellers of produce to do business with each other. ... Risk is the potential impact (positive or negative) to an asset or some characteristic of value that may arise from some present process or from some future event. ... In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon). ...


See also

A credit report summarizes historical financial information collected to determine an individuals or an entitys credit worthiness; that is, the means and willingness to repay an indebtedness. ... The examples and perspective in this article may not represent a worldwide view. ... Debt is that which is owed. ... Installment credit is a type of credit that has a fixed number of payments, in contrast to revolving credit. ... In finance, interest has three general definitions. ... Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. ... This article is in need of attention. ...

External link

  • New York Times/PBS FRONTLINE multimedia collaboration "Secret History of the Credit Card," November 2004.

  Results from FactBites:
 
Credit (finance) - Wikipedia, the free encyclopedia (233 words)
In finance, credit (as in the term "credit card") is the granting of a loan and the creation of debt.
Any movement of financial capital is normally quite dependent on credit, which in turn is dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds.
Credit is denominated by a unit of account.
Credit (finance) Summary (591 words)
Credit as a financial term, used in such terms as credit card, refers to the granting of a loan and the creation of debt.
Credit records are closely in relation with the 3 C's of credit: collateral, capacity, and character.
Credit accounts are accounts where the payment at the end of a month would only be a minimum payment of the total balance.
  More results at FactBites »

 
 

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