Managing your credit should be a daily habit, not just something you think about when things go wrong. Being proactive with your credit management reduces stress and builds a strong foundation for your financial future.
What is credit management?
Credit management is using credit responsibly to avoid too much debt and maintain a healthy credit score. It’s about understanding how credit works, tracking your debt and paying it off in a way that keeps your finances stable.
Good credit management helps you avoid late payment fees, lower the cost of borrowing and achieve financial goals, like buying your first home or starting a business. It’s about balancing how much credit you use with your ability to repay it. This means making smart choices about when to use credit and when to save.
Why credit management matters for your financial goals
Good credit management gives you the freedom to make smarter financial decisions.
Here’s how it can help you reach your goals:
- Access to better financial products: A good credit score opens doors to lower interest rates, a better repayment period and higher credit limits. Poor credit management can make it more difficult to get credit in the future
- Financial flexibility: Managing your credit well means more control over your finances
- Avoiding debt traps: Staying on top of your credit helps you avoid falling into unaffordable debt and getting caught in a cycle of borrowing
Understanding your credit score and report
A credit score is a number given by credit bureaus (like TransUnion or Experian) that shows how well you manage credit. Credit providers use your credit score to assess how risky it is to lend you money. It’s based on factors like your payment history, debt levels and affordability. A higher score improves your chances of getting credit, while a lower score may indicate a higher risk for credit providers.
Your credit report is a detailed summary of your credit history. It lists your credit accounts, such as credit cards and loans and public records such as bankruptcies. You should regularly check your credit report to ensure that it’s accurate and up to date.
Factors that affect your credit score:
- Payment history: Paying on time shows credit providers you’re trustworthy and helps build a good credit score. Missed or late payments can hurt your score
- Credit utilisation: Keep your credit usage under 70% of your limit for a healthy score
- Overdue accounts: Missing a payment can cause your account to become overdue, which lowers your score
- Account history: Opening new accounts without a strong payment history can affect your score. Credit providers want to see you’ve been able to pay on time. Keep your accounts open to show responsible credit management
- Types of credit accounts: A mix of credit accounts (credit cards, loans, etc.) can show credit providers you’re capable of managing different types of credit responsibly
- Credit checks: Applying for too many credit products in a short period can temporarily lower your score. When a credit provider reviews your credit report to process a loan, it’s called a hard check. These checks stay on your report for up to two years
Easily check your credit score on our app:
- Tap Explore, then Credit
- Tap Credit Health
- View your score and tips to boost it
Note: Checking your credit score on our app does not affect your credit score.
Creating a budget for debt repayment
Once you understand how your credit works, set up a budget to pay off your debt to help you manage your finances.
Steps to create your budget for debt repayment:
- List all your debts: Write down all your debts, including the balance, interest rate, minimum payment and due date to see what you owe
- Calculate your income and expenses: Work out your monthly income and expenses. This shows how much you can afford to put towards paying off debt
- Pay off high-interest debt first: Focus on debts with the highest interest rates, then move on to the others. This saves you money in the long run
- Track your progress: Review your spending and debt repayments each month. If you’re struggling to stick to your budget, consider adjusting your spending habits
- Build an emergency fund: An emergency fund helps you avoid using credit unnecessarily, keeps you from falling deeper into debt and protects your credit score
Setting achievable repayment goals
Breaking your repayment goals into smaller steps makes them more manageable.
Tips for setting achievable repayment goals:
- Set realistic timeframes: Aim for a budget-friendly timeline and pay a specific amount each month
- Focus on one goal at a time: Tackle urgent or high-interest debt first, then move to the next
- Celebrate milestones: Acknowledge small wins, like paying off a debt or hitting a target
- Adjust goals as needed: Life happens, and that’s okay. If you need to, extend your timeline, but stay focused
The bottom line
Proactive credit management sets you up for financial freedom. Regularly tracking your credit and setting clear repayment goals can help you stay in control, avoid debt traps and achieve your financial dreams.