What is Credit?

What is Credit?

Credit is any sort of arrangement by which you obtain money, goods or services and agree to repay at a later date. Before a company lends you money, they will put in place certain safeguards to make sure that you will repay it.

Credit safeguards
Safeguards can take different forms depending on the type of credit. For example, the lender may have the right to possess and sell off some property of yours to pay back the debt if you default on credit. Other safeguards include guarantees given by a third party, and the last resort is to take the borrower to court to get the money back.

Why do we borrow?
Borrowing is a considerable responsibility; so only take it on if you feel you can manage it. However, at times, borrowing can be very useful. For example, using credit can be a useful way of:

  • Helping to spread out the cost of big purchases 
  • Making online purchases
  • Making purchases abroad
  • Making purchases we could otherwise not afford, e.g., buying a house
  • Helping us through cash flow irregularities or through difficult times

Further information

The FSA (Financial Services Authority) have produced a Debt Test on their website, Money Made Clear, to help you find out if you have - or are likely to have- problems with your borrowing.

Related Links

In debt and need help?

Call a CCCS counsellor 
on 0800 138 1111.