What Even Is Credit? A Guide for Teens

When adults say stuff like “I need to build credit” or “my credit score dropped,” it might sound super confusing — like, is there a test I’m supposed to study for?? But credit isn’t as complicated as it seems, and it’s something you’ll want to understand before you turn 18. Let’s break it down.

What is credit?

Credit is basically a way to borrow money with the promise that you’ll pay it back later. When you use a credit card, take out a loan, or finance something like a phone, you’re using credit. Your ability to use credit depends on something called your credit score, which is like a grade for how well you handle money you borrow.

Why does credit matter?

Even though you might not be using credit yet, it will affect you big time in the future. Here’s how:

• Renting an apartment? Landlords check your credit.
• Buying a car? You’ll need good credit to get a loan with a low interest rate.
• Applying for jobs? Some employers even check credit history!
• Basically, the better your credit, the easier (and cheaper) adult life becomes.

Can teens build credit?

Yes, but you’ll need help from a parent or guardian. Here are some ways teens can start:

1. Become an authorized user on a parent’s credit card.
2. Ask your parent to co-sign a secured credit card once you’re 18.
3. Use debit cards and budgeting apps to practice good habits now.

Credit vs. Debit: What’s the difference?

Credit card = borrow now, pay later (can build credit). 

Debit card = spend money you already have (no credit involved).

Using a debit card helps you avoid debt, while using a credit card responsibly helps you build credit — both are useful, just in different ways.

Final Thoughts

Credit might seem far off, but learning about it now means fewer surprises later. Start by talking to your parents about how they use credit or checking out a credit score simulator online.

The earlier you learn, the easier it’ll be to make smart decisions when it really counts.