Managing Debt and Credit

​Financial Literacy Skills:

​Managing Debt and Credit

​D

E

B

T

*Debt is money borrowed by one party from another.

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*Many corporations and individuals use debt as a method of making large purchases that they could not afford under normal circumstances.

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*Debt can be classified into four main categories: secured, unsecured, revolving, or mortgaged.

​*Credit is generally defined as an agreement between a lender and a borrower.

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*Credit also refers to an individual or business' creditworthiness or credit history.

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*In accounting, a credit may either decrease assets or increase liabilities as well as decrease expenses or increase revenue.

​C

​R

​E

​D

​I

​T

​What is the difference between

DEBT and CREDIT?

​The difference between credit and debt is essentially a story of "before" and "after." Credit is the ability to borrow money, while debt is the result of borrowing money. When you use credit, you create debt. And the more responsible you are at managing your debt, the more access you may have to credit in the future.