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Credit tips everyone should know

Posted: 16 Nov 2015

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Credit insights

  • Make sure you understand the terms of the credit and read your agreement carefully. This will help you avoid paying any unnecessary or hidden costs.
  • Choose your credit providers carefully. Before entering any formal agreement, you need to do your homework as much as they do theirs.
  • Set a budget and stick to it.
  • Expect the unexpected. Ensure your budget includes a monthly allowance for emergencies and unforeseen circumstances.
  • Never use credit to obtain cash, like using your credit card to draw money at an ATM.
  • Always consider your debt-to-income ratio and don’t live beyond your means. Your total monthly debt repayments should not exceed 30% of your available income (this includes your mortgage, so aim for a 20% debt-to-income ratio, should you not have a mortgage to pay).
  • Use the credit available, but try to avoid hitting the limit. Set yourself a limit to never exceed 75% of the credit available to you.
  • Avoid having too many accounts or loans of the same type (e.g. store cards).
  • Don’t open too many accounts at once.
  • Remember, every time you apply for credit, that every credit provider will do a credit check to determine your creditworthiness. Regardless of the outcome, the enquiry will still reflect on your credit report.
  • Pay your bills and credit instalments on time. Set up automatic payments via debit order wherever possible to avoid defaulting.
  • Try to pay more than your minimum instalments every month. If you have extra money, use it to pay off some debt faster.
  • Don’t take on more than you can handle. Keep your credit balances low and manageable.
  • Never ignore overdue accounts. If you are in financial trouble, try and show your creditors some stable behaviour. If you have missed a payment or more, get back on track and stay up-to-date with you debt obligations.
  • Contact your credit providers if you fall behind on instalments. You should be able to make alternative arrangements for payment to avoid defaulting (not paying at all).
  • Allow yourself time to fix a bad credit report. You did not become a high risk borrower overnight, so you cannot expect to improve your credit score and risk without consistently paying your debt and making better choices over a period of time.

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