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5 Ways to Make Love, Not War with Credit

There are several junctures in life where we make life changing decisions. At some point, we get married, purchase our first house, first car and have a baby (in any order you desire). Looking for furniture, making a down payment, paying for car maintenance and buying that expensive cot are all costly. For many of us, paying for large expenses in one shot is not an option and we find ourselves facing the option of taking on credit.

Credit can either be your lover or worst enemy. With good money management, you find that you can enjoy the perks of taking credit – convenience, protection, discount, cashback and many more. However, inadequate planning will result in endless interest costs and repayments. Making credit your lover isn’t an easy task but if you are ready continue reading and we will walk you through to making credit your lover.

1. Apply for credit and grow your credit early on

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It is important to build a credit history for yourself early on by applying for some credit soon after hitting the legal age. Traditionally, credit can be taken on in the form of credit cards, car loans and house loans. However, recent innovations in fintech allows you to take on credit in other forms. Starting early and ensuring that you make all repayments punctually will give you a good credit score.

2. Spend within your limit (not your credit card’s)
If you are lucky (or unlucky), you may have a high credit limit. However, it is wise to spend only the sum you can afford. If you overspend and cannot pay off your balance, your credit score is on the verge of suffering. In such a case, you have 3 options left – paying the monthly minimum, an amount smaller than the balance or not paying at all. Always opt for paying an amount smaller than the balance, as paying the bare minimum or not paying at all will worsen your credit score.

3. Pay back your loans on time (Use your calendar)
It is always good practice to make repayments on time to stay in the good books of banks. A helpful tip is to use your calendar to set monthly reminders. For both credit cards and term loans, individuals should always strive to repay loans in regular installments and repay more than the minimum amount due. This will ensure that your credit score remains positive and that banks would be keen to extend your credit line down the road.

4. Digitize and track your transactions

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Digitize your transactions by adopting services such as Mynt and Coins.ph that allows you to make payments and transactions online. With digital transactions, you are able to accumulate a digital footprint. The new wave of finance technology means that financiers are increasingly relying on digital data to determine your credit score and eligibility for credit. Furthermore, many of these services summarize your monthly transactions and allows you to plan interests payable and repayments. Browse through the plethora of fintech services and select one that suit your needs!

5. Keep your credit utilization low
Credit utilization refers to the ratio of credit card balance to credit limit. When using a credit card, keeping your credit utilization low gives you a better credit score. A better credit score will give you favourable interest rates in the long run.

In a nutshell, borrow responsibly and make informed decisions. Owning credit has several benefits when used cautiously. Follow the 5 tips above religiously and you can improve your borrowing experience. Just remember to be patient and consistent as building a credit score takes time. Make love with your credit facilities today and you won’t regret it.

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