What exactly is credit? (credit cards)?

Question

i don't have credit yet because im 13 and i want to know how I can get high credit and keep it because i heard if you don't then you can't buy many things or a lot of things will be expensive

Answer 1

"Credit" is just buying things you haven't earned enough to pay for yet, and then borrowing the money and paying back FAR more than you borrowed.  It is, in a word, stupidity*.

Smart people earn interest, dumb ones pay it...

*(just because most people do it doesn't make it less dumb!)

Answer 2

Very very excellent question, especially for a 13 yr old.

Well credit is short for credibility. It's the way to prove or disprove someone's financial worthiness.

One a person is 18 they can start apply for credit cards and loans. You have to keep your accounts in good standing so that when the next person who you want to borrow money from looks at your history they'll be more likely to trust you and loan you the money.

On the other hand if you don't pay your bills, loans and credit cards you won't be able to convince anyone that they can trust you to loan money.

It's just like if you give your friend $5 and they don't repay you, you wont' want to do it again and neither will anyone else.