What is credit?

Your guides introduce the idea of credit.


Instructional Text

Credit means being able to borrow money from a lender with a promise to pay them back, usually in monthly payments. Car loans, student loans, credit cards, and home mortgages are all examples of credit. Image Description
The lender makes money by charging you an extra amount in interest and fees over and above the amount of the loan itself. Image Description
How much will borrowing money cost you? It mostly depends on three things: How much you borrow, called the principal; how long you take to pay the money back, known as the term …. Image Description
and the interest rate you’re being charged. Image Description
Right! And lenders will only loan you money if they have trust and confidence that you’re able to pay them back. Earning their trust is called establishing credit. Image Description
Every time you borrow money and keep your promise to pay it back, you strengthen your ability to borrow again the next time. That’s called building a good credit record, or a good credit history. Image Description
Using credit can help you reach your goals, but remember: credit has benefits and risks. Click the Next button to learn more about both. Image Description

Credit = Ability to borrow $ Establishing credit = Gaining trust of lenders Borrowing = Responsibility to repay (loan payments, interest, fees) Costs depend on interest rates and how long you take to pay Your goal = Good credit history
Click the Next button to discover some benefits and risks of borrowing money.
What is credit? Credit risks vs. benefits Good credit vs. bad Steps to establish credit The “five Cs” of credit