Credit is just a fancy word for borrowed money. Someone (usually a bank) lets you spend money you don't have yet, and you promise to pay them back later.
A real-life example you already know
Imagine your friend Alex asks to borrow $20 for a concert ticket. You say yes — but only because Alex paid you back the last three times. That trust? That's credit.
Now imagine your other friend Jordan asks the same thing. Jordan still owes you $50 from last month. You'd probably say no, or maybe lend just $5. Jordan has bad credit with you.
Why this matters at age 14, not 18
The choices adults make with credit affect every big thing: renting an apartment, buying a car, getting a phone plan, even some job applications. People who learn this early end up with way more freedom and way less stress.
- Good credit: lower interest rates, better apartments, cheaper car loans.
- Bad credit: higher rates, security deposits everywhere, sometimes outright denied.
What "interest" means (you'll see this word a lot)
When a bank lends you money, they charge a fee for the favor. That fee is called interest, and it's a percentage of what you borrowed. Borrow $100 at 20% interest per year and don't pay it back? You'll owe $120 by next year.
Next up: what makes credit good vs bad in real numbers and real situations.