How to build back your credit after a divorce
Here’s what to look for, how to repair damage and start building credit in your own name.
8 min read
Jun 17, 2022
Creditor
Creditor is a money term you need to understand. Here’s what it means.
What is a creditor?
A creditor refers to someone who extends credit to another person or lends them money with the intention that the borrower, also called the debtor, will pay it back at some point. There are two types of creditors: personal and real. Most creditors are real creditors because they have no personal relationship to the borrower and have a legal contract with the borrower for repayment of the money.
Deeper definition
In many cases, a creditor is a bank or other financial institution, such as a credit union. Vendors and suppliers also can be creditors if they allow customers to buy things on credit. Creditors can be either secured or unsecured creditors, depending on the nature of the loan or credit extended to the borrower.
Most debt is unsecured, meaning that the creditor does not have a lien or claim to any of the debtor’s property; the creditor can’t seize it to pay the debt without the court’s permission. Credit cards are an example of an unsecured creditor.
Secured debt is backed by collateral, such as a home (mortgage loan), vehicle (car loan) or any property that the debtor is purchasing with funds from the lender. If the debtor receives a mortgage or vehicle loan from a bank, the bank is a secured creditor. The bank will place a lien on the property, and it can repossess the property if the debtor doesn’t make the payments. A secured creditor has a legal right to that property.
Creditors typically charge borrowers for the privilege of getting a loan or credit. Many creditors charge interest rates on the loans they offer. Interest rates vary based on the amount of the loan, the borrower’s financial situation, credit status and other factors.
Are you concerned about your existing loans? When creditors call, have a script.
Creditor example
If you have two credit cards, one mortgage and one car loan, you have four creditors. Each credit card issuer is a creditor, as is the bank that has your mortgage and the lender from which you are obtaining money to buy the vehicle. The debtor will have separate agreements and contracts with each. Each creditor can sue for nonpayment.
More From Bankrate
-
-
What is a good credit score?
Earning and maintaining healthy credit can help you qualify for loans and competitive interest rates.
4 min read Apr 20, 2022 -
How to build credit
Your credit score has a huge impact on your financial life. The good news is that building credit isn’t hard. Here’s how to start improving your credit today.
7 min read Mar 14, 2022 -
How a late payment affects your credit score
Late payments can cause significant damage to your credit score, and they stay on your credit report for seven years.
4 min read Dec 24, 2021 -
Tally review: An app that helps you pay off credit card debt
Tally consolidates your credit cards into one low-interest line of credit so that you only have to make a single payment.
5 min read Dec 14, 2021 -
How requesting a credit limit increase affects your credit
Getting a boost to your credit line can be helpful for your credit score and wallet, but you should make some decisions before calling your issuer.
4 min read Dec 13, 2021 -
How to read a credit report
Your credit report is a detailed record of your credit history and the accuracy of those details is important. Here’s what to look for when reviewing your credit report.
8 min read Apr 05, 2021 -
The difference between FICO and other credit scores
Thinking you only have one credit score is like believing pigs can fly. Here’s the real deal.
4 min read Jan 28, 2021 -
How to improve your credit score
Follow these steps to improve your credit score over time.
7 min read Dec 18, 2020