Photo by Glenn Carstens-Peters on Unsplash

When used well, credit can be an incredibly useful tool. However, when not used wisely, it can sink your finances.

Here’s how you can make sure credit helps you instead of hurting you:

  • Work on improving your credit score so you can get lower interest rates when you borrow on credit.
  • Don’t fall for the payments puzzle. Lenders might want you to focus more on the monthly payments due on an item rather than the overall cost — but if you don’t do the math on those payments plus the number of months you’ll be in debt, you could end up paying significantly more on that item than you ever thought you would.
  • Make all of your payments on time. Late payments and default are the quickest ways to damage your credit score, which can create a higher cost for you on future credit or even prevent you from getting approved.
  • Use credit when you have to but don’t default to it on every purchase if you have the cash to spare. (Cash to spare means you have cash in addition to a funded emergency savings account and have set up regular contributions to a retirement account).
  • Consider paying off debt faster than the life of the loan so you don’t lose more money to interest than you have to.

When you enter the credit game with your eyes wide open and these tips in mind, you can feel more confident that you’re not falling into the trap of easy credit, and thus prevent yourself from falling into expensive debt.

Before you buy with credit, read this. 

[FREE TOOL: Are mistakes on your credit report hurting your credit score? Find out here.]