While everyone is out shopping getting the best deals, are you risking your credit with these purchases? Are you shopping for the deals with money saved or are you putting them on credit? If you are paying for the credit card bills in full when it comes through you are in a better position because some credit cards offer money back and you could be saving more. However if you are paying off over a period of months, you are paying interest on top of the purchase price which may not make it such a great deal as you first thought.
Understanding Your Credit
Do you understand what credit is? You are borrowing money from a company and they are going to try and make money from your borrowing. Credit is available to people over the age of 18, from this age you are legally able to have credit in your own name, but is it the right thing to do? It will depend on your ability to understand that while a bank or credit company gives you money in the form of a credit card, and overdraft or even a personal loan, it is not your money and they will charge you interest when you use that money.
The higher the interest rate the more you will pay back to the company over the period of time which is why, if you are looking for credit you must choose low-interest options, payday lenders interest rates are extremely high and are not a good option to consider.
How much you are able to borrow will depend on the amount of money you earn, the higher wages you earn the more money you can borrow because you have more money to spend and can afford.
Are You Effecting Your Future Credit
The more you spend today can affect your future borrowing, there is a limit to the amount you can borrow, depending on the money you have coming in from wages of benefits. If you have too much credit and owe too much money to different financial institutions then if you need money to buy your own home, you might be turned down.
If you are forgetting to pay the bills on time, a day late, you might not think this matters but every time you are late paying a bill this information gets passed on to your credit record and can increase the rate of interest you pay on future credit.
Fixing Your Credit
If you are looking to fixing your credit situation, then it is going to take time and the most important step you can take is making a budget. Know the amount of money you need to spend to pay the bills and know how much these leave you for all the other, more flexible items like your groceries.
If you have debts create a bill payment plan, where you work out a system where you are able to pay off your debt. It is important that you learn to save while paying down debt, this will allow for any future bills or emergencies, which happen so you won’t have to rely on credit.
It is important to fix your credit but also don’t just close down accounts, it is better to show that you are responsible with credit and that you have access to a certain amount and you don’t spend anywhere near this limit. This makes you look like a responsible person when it comes to credit and not a high risk; this will mean you pay lower rates for credit in the future.
Therefore, think about how much an item will cost long-term, if you are putting it on credit.