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How To Use Your Credit Wisely

By: kjmena

Credit is a necessary evil when it comes to personal finances but one that can be managed. When it comes to credit, it is all about your choices, or rather when to use a credit card and when not to use your credit card.

If you make bad choices with your credit, it could cost you a bad credit score or worse a huge amount of debt, but when used appropriately, credit can actually be your friend.

The key is to use your credit wisely and with the right intention.

Being aware of your spending habits.

Everyone has a particular way of spending whether they are aware of it or not. There are those who are frugal, there are those who are generous, and there are those who attempt to budget. Which ever one you are, the important thing is that you use your credit efficiently.

First thing is that you need to realize how you are using your credit cards. Once you take note of that, you can go ahead and start planning and deciding on which expenditures are best suited to be charged on your credit.

Also the expenditures that you do charge to your credit cards, make sure that you can pay them off when your monthly bill comes out. This is crucial if you want to keep your credit in good standing because then you will just fall into debt.


Making sure to get good interest rates. 

When you do go to get a credit card or any form of credit, the most important thing you should be checking for is the interest rate. Also see if there are any changes in the interest rate that can result from you defaulting on your monthly payments. In certain instances, defaulting on your payments can result in doubling of your interest rate.

There a couple of things you can do to ensure that you get a good interest rate, like putting more money down initially or opting for larger monthly payments. Interest is what really makes your debt grow larger so the more control you have over it; the more money you can possibly save.


Using your credit for important expenses.

The most important things you could use your credit on are big expenses, like a car or home. These things are long-term goals and are the mark of a successful credit user.

In order to be prepared to get an auto or home loan, you would have needed to use your credit wisely and well over the years. Having a good credit score for these big buys will be pivotal if you want low interest and small payments.


Be careful when cosigning for loans. 

Being someone else’s cosigner is a responsibility not just for you but the person whose debt you plan on being liable for, too. If you do make the decision to be a cosigner, make sure it is someone you trust and that the amount is within your budget to pay off, if it comes down to it.

You don’t want to sign for someone that is taking on a huge debt load because the chances of defaulting are high and that could ruin your credit. On top of the fact, that if you don’t trust or know the person very well, you will get stuck with the loan and be forced to pay it off as the cosigner.

Before you sign any documents, make sure you read them over and seek professional advice if you are still unsure. Being a cosigner could last years and you don’t want to be the one suffering for it.

Credit is an important aspect of a healthy financial diet and necessary for a successful financial future. If you use it wisely, you will be able to achieve all of your goals but when used in the wrong way, it can cost you. Make sure to do your research and educate yourself on any aspects of credit before you make any final decisions. In fact, get expert advice if necessary, so that you are completely aware of your situation.

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