Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.
However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.
Credit is the trust that allows one party to provide enough money or resources to the other party, where the other party does not repay the first party immediately. Several types of credit are available such as,
Bank credit refers to the whole amount of credit available to an individual borrower from a financial institution. While the trade credit is a form of credit that allows a customer to purchase goods from the seller with the agreement to pay the purchase price at the agreed future date. Next, consumer credit is a form of personal credit where the individual purchases goods or services without making an immediate payment.
In real estate, the concept of credit was first used in the 1520s. A time was before extending the credit facilities to creditors or borrowers in the last time. This was assessed by the potential borrower's creditworthiness and their reputation alone. The concept was not advanced like the present day, and traders used to make lending decisions based on the borrowers' personal opinions and other beliefs. This kind of method was subjective and tends to be biased and manipulated and therefore would lock out the potential credible borrowers.
Recently, the procedure to assess the creditworthiness of potential borrowers involved a more objective approach than the subjective one in the past. So, instead of relying on different opinions and personal beliefs, the creditors now examine the borrower's credit history by inspecting their credit report, which is obtained from the credit bureaus. Therefore the credit report shows how much credit the borrower has borrowed for the previous seven years and how much they had to pay as timelines or repayments, history of defaults, history of auctions or foreclosure, etc. At the same time, these credit bureaus provide a credit score based on the borrower's credit history, and the lenders can rely on the information to determine whether or not to extend the credit.
