What Young People Need to Know About Credit

What Young People Need to Know About Credit


Do you consider yourself to be a trustworthy individual?

While it may be true that your family and friends would be willing to vouch for you, the reality is that the rest of the world has no idea of your level of trustworthiness. As a result, banks, car dealers, mobile phone companies, and other businesses must rely on your credit score to inform their decisions.

For these reasons, understanding credit and building it up can be one of the most important ways of setting up future financial success:

Visualizing the Extraordinary Power of Compound Interest

Credit is important for the four key reasons:

1. Convenience
Credit gives consumers more purchasing power than their income alone. Most daily transactions occur using credit, and surveys show that 40% of people prefer spending using credit over cash or debit.

2. Future Planning
Credit provides opportunities to buy big ticket items like homes or cars. Items like these are difficult to pay for with cash alone!

3. Benefits
Credit often provides rewards for those that spend it wisely. For example, Air Miles or other loyalty programs are often tied to credit cards.

4. Emergency Preparation
Having extra financial means allows you to be prepared for any emergency, such as an accident or a hospital visit.

To take advantage of these benefits of credit, it’s important not only to understand how it works, but how credit can be built up over time. Securing a good credit score can be the difference between owning an important asset (house, car, etc.) or being denied by lenders.

For these reasons, how you approach credit can have a ripple effect on your financial future, so it is crucial to adopt smart credit habits early on in life.

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Jeff Desjardins

Jeff is the Editor-in-Chief of Visual Capitalist, a media site that creates and curates visuals on business and investing. He has been quoted or featured on Business Insider, Forbes, MarketWatch, The Huffington Post, The World Economic Forum, and Fast Company.

  • Noel Dunivant

    I like this credit course a lot, but I couldn’t get past “principal” being prominently misspelled at the outset. Certainly reduced credibility of course.

    May 7, 2018 at 6:28 pm Reply
  • Betsy Nilsen

    This infographic on credit is GREAT!! I’m just finishing a unit on credit and wish I had this sooner. It’s definitely a keeper for next time.

    May 8, 2018 at 2:38 pm Reply

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