The concept of credit may seem like a modern invention, but it is believed that credit is as old as the invention of the wheel.

The earliest known case of credit occurred in 3500 BC. BC In Sumer (today’s southern Iraq). In 1800 BC The first known law on credit, the Code of Hammurabi, was written in Babylon.

50 BC The philosopher Cicero from the Roman Republic wrote an account in which his neighbor bought land by using credit.

However, it is believed that modern credit reporting originated in England in 1803 and that a group of English tailors are involved.

What is credit

Do not despair if you are not entirely sure of this term.

Simply put, loans are funds borrowed from banks and financial institutions that are repaid at a later date and usually include both the interest and the principal amount.

This is in contrast to direct debit, where goods and services are paid for with money that you currently own or have.

A major benefit of paying with credit is the ability to pay for something you may not otherwise be able to.

For example, if you want to study at a university but don’t have the necessary tuition, you can take out a student loan to finance your education.

Nowadays, credit is inextricably linked to our daily lives and we often need it for large item purchases.

If you are planning to buy a car or a house, the most common option is to get a loan from a bank.

Different types of loan products

There are two types of loan products: secured loans and unsecured loans. Secured loans are loans that are tied to collateral.


Collateral is an asset that is pledged as security for the repayment of a loan. If you do not make the payment on time, the securities will expire.

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

Conversely, unsecured loans are borrowed money that is not tied to collateral.

Some examples of unsecured loans are home renovation loans, student loans, unsecured credit cards, and unsecured overdrafts.

When applying for a loan, make sure that you know what type of loan you are applying for.

Effects of bad credit history

After you have successfully received a credit, it is very important to make sure that payment is complete and on time.

Failure to do so often incurs a late fee and interest.


If there is an extended period of partial and late payment, you can enter into a debt that may get out of control.

If you are unable to make payments in full and on time, your payment records will be compromised.

This, in turn, affects your creditworthiness.

A bad credit score will deter lenders from providing future credit to you.

Before you sign up for a credit card or take out a loan, you should know the terms of your loan application.

Follow these instructions carefully to avoid going into huge debt.

Advantages of exemplary credit behavior

On the other hand, good credit history offers several rewards and benefits.

Besides not having to worry about debt accumulation, you are essentially building a positive credit reputation.

Banks and financial institutions often offer better interest rates than usual for loan applications with a positive credit rating.

Many credit card companies often have a rewards program that can be very attractive.

This comes in the form of cashbacks, vouchers, vacations, airline miles and more.


Now that you know what credit is, you may want to learn more about how you can build a good credit reputation.

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