How good are you with your money? How good are you with your credit? Those are two different questions, and while many people might have an answer for the former, there are plenty who don’t really know how to tackle the latter. The truth is that a great many of us are under-educated when it comes to credit, but how we use it can often make a bigger difference in our financial futures than cold hard cash. If you’re planning for big investments down the road, then it’s time to start making better use of your credit and really manage your debt now.
Know your current debt
You may very well know what debts you have and what your existing credit card balance is. However, people will often fail to really do the math to understand what they are truly going to be paying back, not just what they owe. Having credit card debt isn’t terrible, and if you can manage it regularly, it can even help your credit score. But you have to take into account interest through your APR to figure out how much money you have to put into it to really calculate how much credit card debt you have. The same goes for any other kinds of debts. Don’t put together a debt management strategy unless you have a real understanding of what your financial milestones are.
Don’t be lazy when choosing creditors
Naturally, ignoring APR and other charges is what gets people into more debt than they can handle in the first place. Regardless of what type of credit you need, do your research. There are plenty of sites that can help you compare insurance, credit cards or loans. Beyond getting a range of different interest rates, you will also be able to check out different charges and different loan periods that can help you form a credit use and repayment strategy that better fits your income. Then there are those loans that fit specifically to different demographics of people, such as veterans or first-time homebuyers. Spend hours exhausting your options and comparing creditors before you decide to go with one.
Use your credit only when it makes sense
Another issue that many have is that they use their credit cards like a debit card, getting charges on it on a whim. This isn’t to say that you can’t use your credit card for shopping. Credit cards are better used for shopping online, for instance, because of the heightened level of security they offer. If you have the available funds on your debit card or in cash and you’re not cutting into your budget, then use them in physical stores, rather than just kicking the ball down the road. In general, it’s a good idea to focus on using credit more for investments than for quality-of-life purchases, too.
The sooner you learn how to manage debt and how to use credit healthily, the better treatment you’ll get from creditors in future. Don’t put it off any longer.