Money Matters – Credit

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Avoid a credit crisis

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Know and understand the difference between good and bad credit so you can establish a healthy credit record.

The word credit does not have to be associated with negativity. There are two types of credit – good and bad.

Good credit is created when you pay your bills on time and making sure you catch up when you skip a payment. Keep the amount in your credit card balanced by not using your total credit limit. This way, you get to enjoy the benefits of a credit card without ruining your credit score.

Bad Credit is a result of failing to pay back your credit cards, loans, bonds or store cards on time. A track record of bad payments leads to bad credit. This leads to credit lenders rejecting your application for credit and loans.

What is a credit score?

This is used by credit lenders, such as banks, to measure your credit worthiness. A high credit score increases your chances of getting credit, while a low score affects those chances.

Overcoming bad credit

Changing your credit score means shifting your spending behaviour, such as:

  • Having a budget detailing your income and expenditure.
  • Spending wisely – avoiding impulse buying.

Cutting down on things you don’t need, such as some leisure activities.

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Master your budget

So you’ve just started budgeting, yet something unexpected always seems to take you off track, right? Try these tips to help you stay on your budget and reap more benefits from it.

The beginning of budgeting

The early stages of a budget are usually the hardest. Although you can control your budget, you cannot control life’s events. This is why the moment you start a budget, you seem to be faced with a lot of unfortunate events that require you to divert from it. So, when you are tempted to break your budget, the key is to:

  1. Remember why you started – such as the need to gain control over your finances or having extra cash to put away every month.
  2. Picture yourself enjoying the benefits that come with having enough to save and spend on the things that really matter – such as life cover, education or a dream vacation.

What happens if I fail?

Start again. Always approach your budget as a lifestyle, not a one-time event. Each failure means you are heading in the right direction to break unhealthy spending patterns.

More tips

  • Write it all down – Journal your budget goals and victories to track your progress.
  • Rewards – Always celebrate every budget victory.
  • Be saving savvy – Never dip into your savings, even if an unexpected event comes up.
  • Plan ahead – Save the extra cash you have left for emergencies and unexpected events.
  • Refinement – Keep refining and adjusting your budget – the more you budget, the less you’ll start spending on things you don’t need.

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