Credit according to financial experts, is a contractual agreement in which a borrower receives something of value at a particular point of time and agrees to repay the lender at some later date.
Credit is believed to determine the borrowing capacity of an individual or company. A credit history is the record of someone or their organization's financial dealings based on credit.
It is an account of their past borrowing and repaying. It also contains facts about late payments and bankruptcy, if there is any.
A credit reputation can also be used as an alternative to a credit history. A credit history is generally maintained by credit bureaus set up in several countries.
When a customer interested in obtaining credit applies for credit from a bank, whether it is a nationalized bank or private bank, his personal input are forwarded to these credit bureaus.
From time to time these bureaus update the status of the credit holders' accounts, cross checks their personal information, such as their address or contact numbers and records even the change of names, if there is any.
All of this detailed information is required to understand the applicant's credit worthiness. Moreover these records are maintained to keep track of the person's whereabouts and also to make sure that he pays his debts in the stipulated period as mentioned in the credit related agreements.
Credit and associated financial transactions help in boosting a country's financial growth. A credit history further helps to determine annual percentage rate of a country's financial dealings.
Although it's hard to keep your credit record clean, in today's world it is almost mandatory.