Credit is a loan from a financial institution that must be repaid by a certain date, usually with interest. Interest is a fee charged for borrowing money. The amount a person owes is their debt. It includes both the amount borrowed and the interest fees charged. The more money someone borrows and the longer it takes for them to pay it back, the more money they will spend on interest fees.

Banks and companies that lend money also report how a person uses credit to credit bureaus and other organizations that track information about how people use credit. This information creates a credit history, credit report, and credit score.

• Credit history: Information on how a person has used credit in the past.
• Credit report: The document that shows a person’s credit history.
• Credit score: The score created by a credit bureau by assigning numbers to the information on their credit report. A person's credit score is a three-digit number. When someone applies for a new loan, a financial institution or lender uses this score to help decide whether or not to offer them a loan and how much interest they should be charged. A credit score is a continually changing number because the information in one's credit history changes as they make financial decisions.

Head Start staff can help families increase their knowledge about their credit — while increasing their own knowledge about building and maintaining credit.

Ideas for Action

1. Learn about the pros and cons of credit.

Staff can work with families to understand credit — what it is, what it affects, and how to build it.

Start the Conversation

• "What goals do you have that require credit?”
• “What is unclear about the credit system?”
• “What concerns do you have about using credit?”

2. Pull a free credit report.

Staff can support families in accessing their credit report. Consumers are entitled to one free credit report per year from each of the three major credit bureaus.

Start the Conversation

• (If checked before) “Tell me about your experience checking your score before. What was easy or difficult about it?”

• Requesting Your Free Credit Reports (worksheet)
• How do I get a copy of my credit report? (video)

3. Review their credit report.

Staff and families can walk through a credit report together to check for errors and to better understand a family’s credit history. Staff can share tools to ensure the family has the information they need to review their report.

Start the Conversation

• "What do you see on the report that surprises you?”
• “What opportunities for action can you think of?”
• “How frequently would you like to check your report??”

• Reviewing Your Credit Reports (worksheet)
• How do I dispute an error on my credit report? (video)

4. Pull their credit score.

Staff can help families access their credit score. Staff and families can discuss what their credit score means and how it might impact their future goals.

Start the Conversation

• “What is your reaction to the score?”
• “What situations contributed to your score?”
• “How frequently would you like to check your score?”

• Where can I get my credit score? (guide)

Learn More with These Resources

• Credit Reports and Scores – usa.gov (resource collection)
• Credit Reports and Scores – consumerfinance.gov (resource collection)
• Free Credit Reports (resource collection)

Last Updated: September 7, 2023