Healthy Borrowing to Build your Credit Score

Many people have developed a negativity on credit cards. You will hear stories about credit cards eating you up and controlling you. Some people even go as far as telling you that credit cards are evil and have the capacity to possess you. Much of it is true except the  fact that credit cards are not evil and they are not made for the purpose of possessing you. The truth is it is consumers who mostly gets possessed by their desires to make unnecessary purchases and their ego defense mechanisms deflects the blame on the credit cards.

The very first thing that you need to know is that debt isn’t always bad. You will sometimes need to borrow money to patch things up. As long as you are able to pay it and the interest rates are acceptable then you should be still financially well while paying your debt. Sometimes you need to have a loan and pay it on time to create something positive on your credit score. Not having a credit history is almost the same as having a bad one. So to paint your credit history you can take on a small loan that you can pay and make sure that you pay it well and you pay it on time.

Credit cards are conceived to allow people to spend without using cold cash. Cash can be dangerous to carry around and they can also be quite inconvenient. The problem with credit cards begins when you spend more than you can pay. Your credit limit does not represent the money that you can spend it only sets a limit to prevent the bank from taking losses out of purchases that you are unable to pay. Do not think of your credit limit as a fluid income because doing so sets the dangerous journey of spending more than you can into motion.

Healthy borrowing means borrowing just the right amount of money and paying it on time. This will not only help your credit score but it will also help you practice your personal financial management skills. There are many ways how you can achieve this. First is you can opt to get a credit card and spend only what you can pay. Creating a cycle of spending and paying it month after month and billing period after billing period will have a positive impact on your credit rating.

The next way you can achieve healthy borrowing is by opting for a short term loan. An example would be a payday loan that you paid up on time. Another example is getting a personal loan for a payment term of 6 to 12 months. Once you have paid out the loan on time it will now become a positive entry on your credit history.

When managing your finances, it is important to know that loans and debts are not always bad. Sometimes they do more good by teaching you how to manage your finances or  they serve as a reminder that you have limitations and hence you need to manage your purchases much better.

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