Credit

A letter of credit is a method of payment, considered less secure than payment in advance but more secure than documentary collections and open account from the seller's point of view. From the buyer's point of view it offers more security than payment in advance but less security than documentary collections or open account terms. However, it is generally considered that Letters of Credit (otherwise known as "Documentary Credits") offer a good balance of security between the buyer and the seller, because both the buyer and seller rely upon the security of banks and the banking system to ensure that payment is received and goods are provided. In a Letter of Credit transaction the goods are consigned to the order of the issuing bank, meaning that the bank will not release control of the goods until the buyer has either paid or undertaken to pay the bank for the documents. In the event that the buyer is unable to make payment on the purchase, th...

Adverse credit Adverse credit history, also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history, and bad credit history, is a negative credit rating. A negative credit rating is often considered undesirable to lenders and other extenders of credit for the purposes of loaning money or capital. In the U.S., a consumer's credit history is compiled into a credit report by credit bureaus or consumer reporting agencies. The data reported to these agencies are primarily provided to them by creditors and includes detailed records of the relationship a person has with the creditor. Detailed account information, including payment history, credit limits, high and low balances, and any aggressive actions taken to recover overdue debts, are all reported regularly (usually monthly). This information is reviewed by a lender to determine whether to approve a loan and on what terms. As credit became more popu...

Credit scores vary from a scoring model to another, but in general the FICO scoring system is the standard in U.S., Canada and other global areas. The factors are similar and may include: Payment history (35 % contribution on the FICO scale) - A record of negative information can lower a consumer's credit rating or score. In general risk scoring systems look for any of the following negative events; charge offs, collections, late payments, repossessions, foreclosures, settlements, bankruptcies, liens, and judgements. Within this category FICO considers the severity of the negative item, the age of the negative items and the prevalence of negative items. Newer is worse than older. More severe is worse than less severe. And, many is worse than few. Debt (30 % contribution on the FICO score) - This category considers the amount and type of debt carried by a consumer as reflected on their credit reports. There are three types of debt considered. Revolving debt  - This is ...

A credit history is a record of a borrower's responsible repayment of debts.A credit report is a record of the borrower's credit history from a number of sources, including banks, credit card companies, collection agencies, and governments. A borrower's credit score is the result of a mathematical algorithm applied to a credit report and other sources of information to predict future delinquency. In many countries, when a customer fills out an application for credit from a bank, credit card company, or a store, their information is forwarded to a credit bureau. The credit bureau matches the name, address and other identifying information on the credit applicant with information retained by the bureau in its files. The gathered records are then used by lenders to determine an individual's credit worthiness; that is, determining an individual's ability and track record of repaying a debt. The willingness to repay a debt is in...

A  l ine of credit is credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of commercial bills, traditional revolving credit card account, etc. It is effectively a source of funds that can readily be tapped at the borrower's discretion. Interest is paid only on money actually withdrawn. (However, the borrower may be required to pay an unused line fee, often an annualized percentage fee on the money not withdrawn.) Lines of credit can be secured by collateral, or may be unsecured. Lines of credit are often extended by banks, financial institutions and other licensed consumer lenders to creditworthy customers (though certain special-purpose lines of credit may n...

The words debit and credit are both used differently depending on whether they are used in a bookkeeping (accounting) sense, or non-accounting sense. In a non-accounting sense, "debit" is: a sum of money taken from a bank account. In a non-accounting sense, "credit" is a sum of money placed into a bank account. money available to spend. money available to borrow. The reason why individuals see debits and credits in the above manner, is that the bank statement presented by the bank to the customer is the bank's view of the account. The bank views money in a chequing account as money the bank owes to the customer, i.e. a liability, and in the rules of accounting, an increase to a liability account is a credit. Likewise, when a bank lends money to a customer and places the money into the customer's chequing account, the bank has increased its obligation to pay that money, which is a liability, and this increase is a credit and appears in the cre...