Credit history facts for kids

Credit history or credit report is like a report card for how you handle money you borrow. It shows if you've paid back loans or bills on time in the past. This information helps banks and other companies decide if they can trust you with money.

Sometimes, people also use the term credit reputation to talk about your credit history or your credit score. Your credit score is a number that quickly shows how good your credit history is.

When you want to borrow money, like for a car or even a phone plan, the company you're asking will often check your credit history. They do this to see if you have a good record of paying things back.

What is Credit History?

Your credit history is a detailed record of how you've managed borrowed money. It includes information about:

• Loans you've taken out, like for a car or a house.
• Credit cards you've used.
• How much money you've borrowed.
• If you've paid back on time or if payments were late.
• If you've ever had serious financial trouble, like not being able to pay your debts.

This record is kept by special companies called credit bureaus or credit monitoring organizations. They collect information from banks, stores, and other lenders.

Why is Credit History Important?

Having a good credit history is really important as you get older. It helps you in many ways:

• Borrowing Money: If you have a good history, banks are more likely to lend you money for big things like a car or a home.
• Getting Credit Cards: Companies will be more willing to give you a credit card.
• Renting a Home: Landlords often check credit history to see if you are reliable with payments.
• Getting a Job: Some employers might check your credit history, especially for jobs that involve handling money.

A good credit history shows that you are responsible and can be trusted to pay back what you owe.

How is Credit History Created?

Your credit history starts to build when you first borrow money or open an account that reports to credit bureaus. This could be:

• A student loan for college.
• Your first credit card.
• Even some phone contracts or utility bills can sometimes be part of your credit history.

Every time you make a payment on time, it helps your credit history. If you miss payments or pay late, it can hurt your history.

What is a Credit Score?

A credit score is a number that summarizes your credit history. It's like a quick grade for how well you manage borrowed money.

• Scores usually range from 300 to 850.
• A higher score means you have a better credit history.
• Lenders use this score to quickly decide if they want to lend you money.

How to Build Good Credit

Even though you might not be borrowing money yet, it's good to know how to build a strong credit history for the future:

• Pay Bills on Time: This is the most important thing. Always pay your bills, like phone bills or subscriptions, before their due date.
• Don't Borrow Too Much: Only borrow what you know you can pay back easily.
• Keep Accounts Open: Having a long history of responsible borrowing helps your score.
• Check Your Report: When you're older, you can get a free copy of your credit report each year. It's smart to check it for any mistakes.

Building good credit takes time and responsible habits. Starting good money habits now can help you a lot in the future!