Credit Basics
What is credit?
Credit is borrowed money that you agree to pay back later.
What is a credit score?
A 3-digit number (300–850) showing how risky or trustworthy you are to lenders.
What is the minimum payment trap?
Paying only the minimum keeps you in debt longer and costs more in interest.
What’s the best way to start using credit if you're new to it?
Start with one card and treat it like training wheels - focus on discipline and consistency before adding more.
When planning a big purchase, why should you look beyond just the sticker price?
Because monthly payments, taxes, insurance, and maintenance add up and can strain your finances.
Who gives credit to people?
Banks, lenders, and credit card companies.
Is your credit score based on your income or your financial behavior?
It’s based on your behavior, not your income — like how you use and repay credit.
If you owe $5,000 on a credit card at 24% interest and only pay the minimum, how long will it take to pay off?
Over 20 years.
How can beginners build credit wisely?
Start with one card and use it for small, budgeted expenses.
Why is it smart to delay big purchases?
It gives you time to save, avoid debt, and protect your credit.
Why does credit matter for your life?
It affects whether you can borrow money and how much it will cost.
What affects your credit score the most?
Payment history — paying on time. It’s 35% of your score.
How much interest could you end up paying on that $5,000?
Around $10,000 just in interest.
Why should you ask for a credit limit increase?
It lowers your utilization rate - but only helps if you don’t spend more.
What’s the difference between pre-approval and affordability?
Pre-approval is what a lender offers; affordability is what fits your real budget.
What happens if you have weak or bad credit?
Things become more expensive or harder to access, like loans or apartments.
What are the 5 factors that make up your credit score?
Payment history, amount owed, length of credit, new credit, and credit mix.
Why aren’t credit cards free money?
They’re loans with high interest - not gifts.
Why should you use credit only for budgeted items?
It avoids overspending and shows lenders you’re responsible.
Why is buying a used car often smarter than new?
It costs less, avoids quick depreciation, and helps build credit responsibly.
Why do many people struggle with credit?
Because they don’t understand how it works and build debt without realizing it.
Why do missed payments hurt your credit score?
They show you’re unreliable, which makes lenders see you as a risk.
Why is making only minimum payments so dangerous?
It makes you pay way more over time and traps you in debt.
How does linking small bills to your credit card help?
Regular low-risk charges show consistency and build your credit history.
How do emergency funds protect your credit?
They prevent you from going into debt when things go wrong.