Every now and then you may have unexpected expenses or find
yourself a bit short of money. Credit can help you through a
temporary money shortage - if you use it sensibly.
Can you afford to borrow?
Before you start looking for credit, do a budget. The amount you
can borrow and repay will depend on:
- Your income
- Your expenses
- Your estimated repayments
Here is how to work out what you can afford to
borrow. Keep in mind that your ability to make repayments might
change in the future - your income could drop for some reason, or
your expenses might increase (for example, your rent or medical
Shop around for
Credit providers are always looking for new business, so make
sure you shop around to get the best deal you can. If you were
looking for a car, you wouldn't buy the first one you see. It's the
same when you borrow money: compare different credit providers,
their products, features, fees and charges.
Here is how to get the best credit
For some types of loans and credit products, an ad that includes
the interest rate must also show you the 'comparison rate'. The
comparison rate is the interest rate plus most of the fees and
charges you must pay on a loan. It will give you a better idea of
how much a loan will really cost you.
But remember that the comparison rate will just be an example
for a particular size loan - it may be different for the amount you
want to borrow.
Here is more information on comparison
Using a credit
When you get a credit card you will receive a monthly statement
that shows your purchases, the total amount you owe, the minimum
amount you must pay and other information.
If you pay the entire amount owing by the due date, you
generally won't pay any interest. If you pay less than the entire
amount, you will be charged interest.
Paying back your debt by making only the monthly minimum payment
can mean years of repayments and cost a lot more than you might
think. Your monthly statement will show you how many years it will
take you to repay the debt if you only make the minimum monthly
Don't forget that even if you've paid off all you owe, you'll
have to pay your card's annual
fee each year if it has one. Find out more
about credit cards.
Work out how you can pay off your card faster and how much you
Credit card calculator
Be wary of credit offers
If you get an offer of more credit, be wary. See credit
offers for more information on credit limit increase
invitations, honeymoon rates, cash back offers and balance
It's a good idea to check your credit report every year to guard
A credit reporting agency will have a credit report on you if you have:
- Applied for a personal loan or credit card in the past 5
- Signed a mobile phone contract
- Paid a bill at least 60 days late (that debt can be as little
Your credit report holds your personal details, information
about your credit applications and if you have been more than 60
days late making a repayment.
Credit providers use credit reports to help them decide whether
to give you credit. If your credit report reveals a poor history of
repayment, they may consider you a high credit risk and not lend
you money. Find out more about your credit report.
Case study: Giorgos can't get a loan
Desperate to get a new car, Giorgos searched online for the best
deal on a car loan. He applied for a few loans but he got knocked
back. Disappointed, he made a few phone calls to complain and found
to his complete surprise that he was a bad credit risk. He ordered
a copy of his credit report, which showed he was over 60 days late
making a number of credit card repayments. He hadn't realised at
the time that this would affect his future loan applications.
Signing a credit
Before you sign up for credit you should read the contract. It's
essential to know what you're signing up for, who you're getting
the credit from and how much they are charging you.
If you don't understand the credit contract, get help from
someone to understand it. A financial
counsellor is a good person to ask for help. You
may also know someone else who has good knowledge about contracts -
it could be a relative, a teacher or someone at work.
Do not sign anything you don't understand. You may not be able
to cancel a contract just because you change your mind. Here are
some tips on credit contracts.
Last updated: 22 Feb 2017