What is credit?

When a person wants access to more money than they actually have, a financial services firm can provide them with a certain sum of money or line of credit. This can be drawn down in full or in part as the client requires. As most personal loans start at $5,000 most credit accounts are used for amounts under that.

Any person aged 18 years or over can apply for a credit account. The person must provide a lot of personal and financial information is required as the funds are unsecured and for an indefinite term. The client's income and capacity to repay the debt is critical to a successful application. If successful, a credit account is established and a credit card issued.

The account has a credit limit that is calculated using a scoring system based on employment history, residential history, age, income to expenses and credit references. Credit limits vary from $500 - $10,000. Some lenders set a limit of no more than 10% of a client's gross income. An annual fee applies to hold a credit account.