What is credit? Credit means that you buy something without using your own money to pay for it. Someone else has loaned you the money and you have promised to pay them back over a period of time, usually in steady increments. In addition to the amount you borrowed, there is typically a fee, called interest, which is charged for the use someone else’s money (interest is expressed as a %).
When you apply for a loan (like to buy a car), you are asking for credit. The lender will evaluate your income and your credit report and approve or reject your loan request. If you paid past or current debts on time, you’ll have a good credit report and a higher likelihood of getting approved for a loan. If you don’t pay your debts on time or don’t pay at all, you’ll have a bad credit report and will most likely be denied from getting more credit.
But what if you don’t have any credit? You have a great way to establish credit right now and learn how to use it wisely, with your parent’s supervision and guidance. Your Money $quad account gives you access to a Visa® credit card with a restricted limit. Buy building a good credit history now, you will be able to obtain a loan later on your own.
Credit is all about how well you pay back the money you borrow. Credit can be used in good ways – to buy a home, to buy a car, or to finance a college education. But credit can also be used in not-so-good ways – excessive spending on clothes or electronics, buying a too-expensive home or car, or using credit cards for groceries when you should use cash.
Learn more about credit by visiting the Money $quad pages of the online Education Center.
