Definition of Credit

1. The ability of a business man to borrow money or obtain goods on time, in consequence of the favorable opinion held by the community, or by the particular lender, as to his solvency and reliability. People v. Wasservogle, 77 Cal. 173, 19 Pac. 270; Dry Dock Bank v. Trust Co., 3 N. Y. 356.
2. Time allowed to the buyer of goods by the seller, in which to make payment for them.
3. The correlative of a debt; that is, a debt considered from the creditor's standpoint, or that which is incoming or due to one.
4. That which is due to a merchant, as distinguished from debit, that which is due by him.
5. That influence connected with certain social positions. 20 Toullier, n. 19. The credit of an individual is the trust reposed in him by those who deal with him that he is of ability to meet his engagements ; and he is trusted because through the tribunals of the country he may be made to pay. The credit of a government is founded on a belief of its ability to comply with its engagements, and a confidence in its honor, that it will do that voluntarily which it cannot be compelled to do. Owen v. Branch Bank, 3 Ala. 258.
—Bill of credit. See Bill.
—Letter of credit. An open or sealed letter, from a merchant in one place, directed to another, in another place or country, requiring him, if a person therein named, or the bearer of the letter, shall have occasion to buy commodities, or to want money to any particular or unlimited amount, either to procure the same or to pass his promise, bili, or bond for it, the writer of the letter undertaking to provide him the money for the goods, or to .repay him by exchange, or to give him such satisfaction as he shall require, either for himself, or the bearer of the letter. 3 Chit. Com. law, 336. A letter of credit is a written instrument, addressed by one person to another, requesting the latter to give credit to the person in whose favor it is drawn. Civ. Code Cal. § 2858. Mechanics' Bank v. New York & N. H. in Co., 13 N. Y. 630; Pollock v. Helm, 54 Miss. 5, 28 Am. Rep. 342; Lafargue v. Harrison, 70 Cal. 380,9 Pac. 261, 59 Am. Rep. 416. General and special. A general letter of credit is one addressed to any and nil persons, without naming any one in particular, while a special letter of credit is addressed to a particular individual, firm, or corporation by name. Birckhead v. Brown. 5 Hill (N. Y.) 642; Civ. Code Mont. 1895, § 3713.
—Lino of credit. See Line.
—Mutual credits. In bankrupt law. Credits which must, from their nature, terminate in debts; as where a debt is due from one party, and credit given by him to the other for a sum of money payable at a future day, and which will then become a debt; or where there is a debt on one side, and a delivery of property with directions to turn it into money on the other. 8 Taunt. 499 ; 2 Smith, Lead. Cas. 179. By this phrase, in the rule under which courts of equity allow set-off in cases of mutual credit, we are to understand a knowledge on both sides of an existing debt due to one party, and a credit by the other party, founded on and trusting to such debt, as a means of discharging it. King v. King, 9 N. JEq. 44. Credits given by two persons mufually ; ♦. e., each giving credit to the other. It is a more extensive phrase than "mutual debts." Thus, the sum credited by one may be due at once, that by the other payable in futuro; yet the credits are mutual, though the transaction wonid not come within the meahing of "mutual debts." 1 Atk. 230; Atkinson v. Elliott, 7 Term R. 378.
—Personal credit. That credit which a person possesses as an individual, and which is founded on the opinion entertained of his character and business standing.