Why Credit Is a Powerful Financial Tool

Talking about building credit and breaking barriers with Tori Dunlap

Young woman sitting at desk wearing headphones

Design: The Balance / Julie Bang, Photo courtesy of Tori Dunlap

The world of credit can feel harsh and confusing, but Tori Dunlap wants to change that and make one thing clear: money and credit are powerful financial tools, especially for young adults. 

"Credit cards are like a knife: if you use them wisely, they’re safe and super useful,” she said. “If not, you’ll get cut.”

Dunlap was introduced to credit education at an early age, listening to her parents jest each other about their credit scores. She recalls asking many credit questions as a teen, and that felt like such a normal part of growing up. However, as Dunlap got older, she realized that in many ways, her financial education was not the norm. Rather, it was a privilege. 

Today, Dunlap is the educator and speaker behind Her First $100K, her business that started as a social media following of her personal saving goal and is now dedicated to helping young adults (especially women) confidently take control of their finances. Dunlap also hosts a top-ranking business podcast, “Financial Feminist,” which has more than 2 million downloads worldwide. 

To help parents talk about credit and money with their teens, we asked Dunlap about how basic lessons, shared experiences, and language play a critical role in making sure all young adults feel capable and in charge of their credit. 

This interview has been edited for length and clarity.

Start With the Credit Basics

Tell us about your first credit card—how did you use it? 

It was a student card, and that's what I recommend. To be really specific, it was a Discover student card that looked like a cassette tape, which I thought was the coolest. 

Now, this is a privilege that came with the financial education I got from my parents, but when I was probably 13 or 14, we had our first conversation of “You do not put something on a credit card that you cannot afford.” So for me, the temptation to overspend with my first card was never there. I knew I could, hypothetically, but mentally it was just not an option for me.

I’d use it to go out to lunch every once in a while with friends, or if I needed something for my dorm I’d order it from Amazon and put it on my card. I was very low-key. I think my bills every month were $50 or less. It was a great way for me to build my financial confidence,  understand how a credit card worked, and start building credit in a responsible way.

To open their first card, your teen will need to be 18 years old and have proof of income to show they can make account payments. Other options for jumpstarting their credit journey include co-signing their card application or adding them as an authorized user on one of your accounts.

When talking with friends and clients about credit, what do they wish they would have known more about before diving into the world of credit and cards?

I think the reason people, and particularly women, get into debt is because they don’t understand how a loan works. They don't understand interest rates, they don't understand the payment period, or the power that is compound interest. So that's a huge part of financial education—understanding how debt works. 

In my work with clients, a lot of it is like, "I got into credit card debt, and I don't know how to get out because it seems so overwhelming." They feel like they are looking at Mount Everest. I was lucky to understand, even at age 18, that If I put something frivolous on this card, but I can't afford it, well, that's gonna cost me a ton of money. But that’s not the norm, unfortunately.

Credit = Financial Power

What is a piece of credit advice you’ve heard that is just flat-out wrong? 

The narratives of, "credit cards are bad,” or “you don't really need a credit score." First of all, neither is accurate, especially when it comes to credit scores. More importantly, that messaging is so harmful. 

You need a credit score, unfortunately, to exist in this country and to accelerate your financial life. You really do. And credit cards are not bad, as long as you use them responsibly. Anybody who tells you otherwise...well, that's a huge red flag.

Credit scoring systems typically weigh data points such as account payment history, credit utilization ratio, and recent credit applications when determining an individuals’ rating. Unfortunately, those systems don’t always paint a complete, unbiased picture of consumer lending risk, particularly for people of color or below-average income. That said, FICO credit scores are used in 90%of lending decisions today.

What are some ways parents can set a good example with their credit card and spending habits?

My parents were really intentional about spending their hard-earned money on things that really were important to them. We were definitely a frugal family, but we traveled two or three times a year because that's where they wanted their money to go. 

So I think one thing you can demonstrate as a parent is that you don't have to be completely deprived to be financially smart. You don't have to tell yourself, "I can never spend money ever." Instead, showcase how to be frugal with things that you don't care about as much. You don't have to stop spending money, you just need to stop spending money on things you don't care about. 

Learn Alongside Your Teen

What is something all parents can do to help set their teen up for financial success, regardless of their own financial background or current situation?  

I was walking around with a friend and a girl recognized me. She was with her mom and freaked out like the way I would freak out about seeing [actor] Timothee Chalamet on the street. After she said hi, her mom said, "Your content has impacted both of us. We listen to your podcast together. We talk about you and your content all the time together. We've had conversations with the family, she started to invest, and she's a junior in college." 

And I think that’s it. Whether it’s my content or somebody else's, consume content with your kid. TikTok, YouTube, or a podcast. It’s even better if your child picks out a platform or voice that resonates with them and aligns with their values. I think that that's a really great way for you to become educated and also open that dialogue with the next generation.

Speaking of TikTok, do you have any concerns about the world of social media intersecting with financial education? 

I've been on TikTok since July of 2020 and in nearly every interview I've done since, a reporter has asked me some variation of that question, which I think is very interesting. Inaccurate and false information has always been out there—the snake salesmen, get-rich-quick schemes, they’re not new. It's just on new platforms, and I think we fear what we don't understand. 

In reality, I would say only about 5% of what I see is bad, but I also try to follow people who I know are credible. And that’s a huge part of it. Verify that the information is coming from a source worth trusting. 

Eliminate Fear To Empower

Based on your own experience and what you’ve learned from clients, how would you recommend parents approach money lessons with their teens? 

The number one thing is non-judgmental content, voice, and narratives. We know that shame and judgment don't actually motivate people to make changes, and it's really harmful in a system where people already have a lot of distrust and a lot of shame. 

Tell your teen something like, “Hey, if you have any questions about this, let me know, and we can talk about it together. You can ask me questions, and even if I don't know, I'll figure out the answer for you."

And if they come to you with a financial mistake or something they regret doing with their money, don’t shame them. Say, "Hey, it sounds like we should talk about this more. I'm here to help you get the resources you need so this doesn’t happen again.” It’s all about keeping the conversations going, even into adulthood.

If a teen isn’t interested in learning about credit or talking about money, how can parents breathe life into the subject? 

I think for too long the messaging has been, "The reason you're not rich is because you've made these choices." But only so much comes down to your individual choices. It's also systemic oppression, wage gaps, racism, sexism, ableism ... the list goes on.

Part of the reason I think the Her First $100K community has grown so quickly is because we're not just talking about personal finances, we also emphasize how getting our financial [stuff] together can be a form of protest and strength. If you are a Black person who has started investing in the stock market, that is a form of protest against a system that doesn't want you to gain financial stability or wealth. 

So it's not just about your individual money choices, it's also about building financial foundations in order to impact not only you but the rest of your community. Financial education has to include both. It can't just be, "You do this, or you don’t do that,” or, “This is how to budget,” or “This is how to pay off debt." It has to be, "Here's how we use this knowledge. Here's how we vote, protest, donate, and do all these things in order to change the society we're in."