Financial Terms / credit

# Understanding Credit: A Comprehensive Guide to Borrowing and Financial Trustworthiness.

Credit refers to the ability to borrow money or access goods and services with the promise of repaying the lender at a later date, often with interest.

## Formula

``FICO Score = (Payment History Weighted Score + Amounts Owed Weighted Score + Length of Credit History Weighted Score + New Credit Weighted Score + Credit Mix Weighted Score) / 5``

## How do I calculate the credit?

```It is important to know how to calculate your credit score, as this will help you understand your current financial situation and what steps you need to take to improve it. A FICO score is the most widely used credit score in the United States, and is calculated based on the information contained in a person's credit report. The categories that comprise a FICO score include payment history, amounts owed, length of credit history, new credit, and credit mix. To calculate your FICO score, you can use a calculator or spreadsheet program such as Sourcetable, and input the following formula:

`FICO Score = (Payment History Weighted Score + Amounts Owed Weighted Score + Length of Credit History Weighted Score + New Credit Weighted Score + Credit Mix Weighted Score) / 5````

## What is credit?

`Credit is an arrangement between a buyer and seller, or an arrangement with an intermediary, that allows the buyer to receive goods or services now and pay for them later.`

## How does credit work?

`In a credit arrangement, the buyer agrees to pay the seller an amount of money, plus interest, at a later date. The seller agrees to provide the goods or services to the buyer now and to accept payment at a later date.`

## Can I use credit to buy goods or services?

`Yes, credit can be used to purchase goods or services. The buyer pays the seller a portion of the cost upfront, and agrees to pay the remainder plus interest at a later date.`

## Key Points

How do I calculate credit?
`FICO Score = (Payment History Weighted Score + Amounts Owed Weighted Score + Length of Credit History Weighted Score + New Credit Weighted Score + Credit Mix Weighted Score) / 5`
Contractual Agreement
Credit refers to a contractual agreement between a borrower and lender. The borrower receives a sum of money or something of value, and agrees to repay the lender at a later date.
Creditworthiness
The word "credit" may also refer to an individual's or a business's creditworthiness. This is the ability to pay off debt or borrow money without defaulting.
Card-Issuing Bank
A card-issuing bank serves as a middleman between buyers and sellers. This bank issues credit cards to customers, and is responsible for processing payments and providing customer service.