Millennials, how much do you know about credit?

History of credit

The concept of credit may seem like a modern day invention but itis believed that crediting is as old as the invention of the wheel. The earliest known instance of crediting happened in Sumer (modern-day southern Iraq) 3500 BC. In the year 1800 BC, the first known laws surrounding credit, The Code of Hammurabi, was written in Babylon. In 50 BC, philosopher Cicero of The Roman Republic penned an account of his neighbour purchasing land through the use of credit. Modern cred reporting, however, is believed to have originated from England in 1803, involving a group of English tailors.

What is credit?

Today, credit is inseparable from our daily lives and we often need it for big item purchases. If you intend to buy a car or a house, the most common option is to take up a credit loan from a bank or a financial institution. You might be wondering: What is credit? Do not despair if you are not entirely sure of the term as many of us millennials, are not completely financially literate. The information from this article will educate you and help you improve your financial future and reputation.

Credit is borrowed money from banks and financial institutions that is paid back at a later time, which normally includes both the interest and the principal sum. This is in contrast to debit, whereby goods and services are paid with money that you currently own or possess. A significant advantage of paying through credit is the ability to pay for something that you otherwise might not be able to. For example, if you want to study in a university but do not have the tuition money as required, you can take a student credit loan to finance your education.

Different types of credit products

There are two main types of credits: secured credit and unsecured credit. Secured credit are loans that are tied to a collateral. Conversely, unsecured credit is money loaned that is not pegged to a collateral.  Collateral is an asset pledged as security for the repayment of a loan that will be forfeited if you fail to make payment in time. When you apply for credit, be sure to know what type of credit you are applying for! Some examples of secured credits are vehicle loans, housing loans, secured credit cards and secured overdrafts. On the other hand, some examples of unsecured credits include renovation loans, study loans, unsecured credit cards and unsecured overdrafts.

Repercussions of poor credit behaviour

After you have been granted credit successfully, it is very important to ensure that payments in are made in full and on time. If you do not, interests will often be charged. If there is a prolonged period of partial and late payments, you could incur a debt that may very well go out of control. Therefore, if you do intend to sign up for a credit card or take up a loan, you have to be very cautious with the terms of your credit application. By abiding by their terms, you will be safe from the possibility of a default or incurring an enormous debt. If you are unable to make complete and punctual payments, your credit payment records will be tainted and in turn affect your credit score. A poor credit score will discourage credit lenders from providing you with any future loans.

Advantages of exemplary credit behaviour

On the flip side, there are multiple rewards and advantages to having a good credit behaviour. Aside from not having to worry about an accumulating debt, you are essentially building a positive credit reputation. Banks and financial institutions will often offer better than usual interest rates on credit applications to those with a positive credit score. Many credit card issuers often have a reward programme that can be very attractive. For customers with active and positive credit patterns, they are often rewarded with cashbacks, vouchers, vacations, air miles and more! In short, by ensuring that you always make payment in full and on time, you will reap better rewards!


Now that you have more knowledge on what credit is, you may want to learn more on how to build a great credit reputation. With My Credit Reports (MCR) or My Credit Monitor (MCM) from Credit Bureau Singapore, you can now better manage your credit reputation. For comprehensive information on our products or to learn more about credit, you can visit our website at or sign up for our free Consumer Credit talks through our Facebook Page @Creditbureausingapore.




Written by Credit Bureau Singapore

Credit Bureau (Singapore) Pte Ltd (CBS) is Singapore's most comprehensive consumer credit bureau that has full-industry uploads from all retail banks and major financial institutions. It is a joint venture between The Association of Banks in Singapore (ABS) and Infocredit Holdings Pte Ltd.


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