What is Personal Credit?

A personal line of credit is an unsecured revolving line of credit which applicants can use in a variety of ways. Personal lines of credit are extended through banks. These are often linked with checking accounts so that applicants can use them as an extension of their regular bank account. The amount of credit line varies, depending on the bank and credit history of the applicant.
Unsecured lines of credit are provided without any need for collateral. Credit cards are often unsecured unlike home loans. In the case of the latter, these use the home itself as collateral for the loan. Revolving lines of credit have a revolving balance and payment rather than a fixed rate of payment.
Personal lines of credit can be used for things like buying a new car, purchasing furniture, or dealing with other life expenses. As soon as a personal line of credit is activated, the recipient begins to receive monthly statements which disclose the balance, interest, and minimum payment. People can choose to pay off their statements, or carry a balance, depending on their financial situation.

What is Credit Score?

Consumers rely on credit. It has become part of people’s financial systems. Hence, it is essential to understand things such as personal credit reports, credit reports, credit ratings and credit scores. Credit scores are important to consumers so it is equally important to acquire and maintain good credit.
When you use credit, you borrow money that you promise to pay back within specific period. A credit score is a statistical method to determine the likelihood of an individual paying back the money he or she has borrowed. Credit bureaus that issue these scores have different evaluation systems based on different factors. Some may take into consideration only the information contained in your credit report. The primary factors used to calculate an individual's credit score are credit payment history; current debts; time length of credit history; credit type mix; and, frequency of applications for new credit. The scoring systems are based on different criteria which are weighted differently. The three major credit bureaus (Equifax, Trans Union, and Experian) may issue differing scores for an individual, even though the scores are based on the same credit report information.

In addition to using FICO credit scores, most countries including the U.S. and Canada use a scale of 0-9 to rate your personal credit.

What is a Line of Credit?

A Line of Credit is type of revolving loan with preapproved credit limit for a specified period of time. The line of credit gives the borrower flexible access to funds. All major Canadian banks - RBC, TD Bank, BMO, Scotia Bank and CIBC offer lines of credit to their customers. Funds available in the line of credit account can be withdrawn and used any time while the line of credit is in effect.
The borrower can withdraw part or all available funds from his line of credit and they can also repay the funds back at any time. A line of credit is very similar to a credit card because as soon as you repay your balance in part or in full you can use the funds again. That is why lines of credit are considered revolving credit. A line of credit can be unsecured or secured by an asset owned by the borrower. With most Canadian banks, you can access the funds in your line of credit by issuing a cheque, using your bank card, telephone or online banking. The financial institution, which is the source of line of credit, requires a minimum monthly payment. This may vary depending on the bank and the amount you borrowed. The borrower has to repay the loan using the line of credit on its maturity date.

What are Credit Lines and their Benefits?

The most common line of credit is the personal line of credit. Many Canadians have personal lines of credit usually with one of the big five Canadian banks. The money you have access to through your personal line of credit can be used for renovations; purchasing appliances; paying for vacation; making investments; and, consolidating debt. You can draw funds from your line of credit to pay off credit card debt. The personal line of credit limits usually range from a few thousands to hundreds of thousands of dollars. Another type of credit line is the business line of credit or operating line of credit. The business lines of credit are used by millions of small, medium and large enterprises worldwide to finance daily operations.
One of the major benefits of credit lines is the lower interest rate compared to most credit cards. It is very convenient to use and is no different than using your bank checking account. You can write a cheque, use online banking, telephone banking, and access the funds with your bank card. Another benefit is flexibility in repaying the loan. If you have funds, it is possible to repay everything borrowed on the credit line immediately without a penalty.

Importance of Credit Scores

Your credit score is one of your most essential components of your financial life. It plays a vital role in many major financial situations throughout your life. It is therefore important to preserve the positive credit score and image that you have.

References

wisegeek.com
investopedia.com
canadabanks.net