Teen's Guide To Credit How to be an excellent credit user

What is Credit?

Before you can have good credit you must know what credit is.

Credit is money you barrow from a company to buy things. But you don't actually have that money. It is important to have good credit because this is most likely how you are going to buy a car, or a house later down the line.

At the end of the month or billing cycle, which is usually 4 weeks, you have to pay at least the minimum payment. It is best advised to pay as much as you can back even if it is not the full balance (and to reiterated, pay at least the minimum payment each cycle).

What is a credit score?

A credit score is a three digit number that is calculated from your credit report(see "What is a credit report?" to find out the definition). The range goes from 300-850, 300 being worst and 850 being the best. These numbers are then turned into a word rating: Very Poor, Poor, Fair, Good, and Excellent.

Names and number ratios may very.

What is a credit report?

A credit report is a list of all your credit uses, current loans, history, and things of that nature. There are three official companies issued by the government how can give you a credit report: Equifax, Experian, and TransUnion. To get your report is free but to get your score you'll have to pay.

What is used to calculate my score?

The five factors that make up your credit score are amount of money owed, payment history, new credit, credit mix, and length of credit history. Most of these are self explanatory except for credit mix. Credit mix is the different types of credit connected to you, like loans, a mortgage, credit cards, installments...

What now?

You now know what credit is and what goes into it, but know the question is how to build and maintain it.

The first thing you need to do is establish some basic credit. This could be done by getting a checking account, this doesn't build credit automatically but it can help you get your first credit card from the same bank.This will then earn you credit.

You could also have a parent co-sign with you on a account or card, with their good credit history you should be approved. Then by having on-time payments every month done by you it will start to increase your credit score.

Remember: always pay on-time, pay as much back as you can on credit cards balances, try to have a good mix of credit, and never spend more than you can afford.

Visual Learner Aid On Starting Credit

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