You may hear adults talk about credit cards and credit scores, but what do those terms mean? Think of a credit score like a homework grade: Turning assignments in on time helps your grade, while missing deadlines can bring it down.
Credit works in a similar way. Paying bills on time and borrowing only what you can afford builds a stronger credit score.
In this article, we break down what credit is, why it matters and how smart habits early on support your financial future.
What Does Credit Look Like?
Let’s say that a few years from now, you've saved money to buy your first car, but you do not have enough to pay the full cost up front. A lender may offer credit to help cover the remaining cost. In this case, that credit could be a car loan.
When you take out a loan, the lender trusts that you will repay the money based on the terms of the agreement, such as $300 per month, until it is paid off in full. In many cases, you also pay interest, which is the cost of borrowing money.
Other Common Forms of Credit:
Credit cards: Issued by financial institutions or retailers, credit cards let you borrow up to a set limit. If you don’t pay the full balance each month, you may owe interest.
Student loans: This money is used to cover tuition, books and other education-related expenses. Interest accrues on most loans, and repayment typically begins after graduation.
When borrowing money, it is important to compare interest rates. The annual percentage rate, or APR, is the yearly cost of borrowing money, shown as a percentage. The lower the APR, the less a borrower pays in interest.
Why Do Good Credit Scores Matter?
Good credit scores make it easier to qualify for loans for cars, homes and other expenses. They also may help borrowers get lower interest rates because lenders can see a history of on-time debt payments.
A good credit history could also give you an advantage when applying to rent an apartment because landlords often review credit history during the application process.
How to Practice Good Credit Habits Now
Because credit cards and most loans require borrowers to be at least 18, now is a good time to build healthy financial habits. Learning how to budget, track spending and pay bills on time prepares you to borrow responsibly and build strong credit in the future.
Opening an iMember Club account is a great way to put those skills into practice. Monitoring your spending and savings helps you understand where your money goes, which is an important foundation for future credit building.
Things to Remember About Credit:
Compare offers and choose lower interest rates.
Pay monthly balances on time, every time.
Keep credit utilization—amount owed—low by using only what you need and know you can repay.
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