Credit comes in a number of forms; it can be a mortgage to buy a house, a loan to buy a car or a credit card to make those everyday purchases.

If you’re thinking of applying for a credit card or a loan on the Car Cash Point website it’s important to carefully consider all of the factors and weigh them up against your personal needs and values.

Credit can be good and bad; it all depends on how you handle it. According to The Guardian, just over 31 million people hold a credit card, about 60% of the UK adult population.
There are any benefits, however they do come at a small but very important cost, and that’s organisation. Being organised with your personal finances is key, and here are a number tips to help make sure you’re using it in the right way:

Assess your current situation
Understanding your income and expenditure allows you work out if credit is right for you – how much are you looking to spend and can you afford to pay back at least the minimum repayments required? A simple list of your income and outgoings each month can help you understand your financial requirements and whether you can afford the monthly repayment.

Keep up with payments
Paying off your loan or credit card balance in full each month is the best way to use your credit card but if you cannot afford this, it is vital to make at least the minimum payment amount (normally 5-10% of the balance) by the due date, otherwise you will face penalty charges and compromise your credit score, making it more difficult to borrow in the future.

According to Your Money, the minimum payment option is most popular among younger people with 29 per cent of 18-24 year olds and 21 per cent of 25-34 year olds saying that they just make the minimum payment each month. Setting up a direct debit to ensure the minimum payment is made can help prevent you missing the payment date.

Clear the balance each month
If it is possible, the best way to use a credit card is to clear your debts in full every month. This reduces cost of interest charged whilst taking advantage of benefits the cards have to offer.

Avoid impulse buying
If you had to pay in cash right now, would you be making this purchase? You could end up spending more just because you have the extra credit. Be sensible and only use it if you need to.

Build credit rating
Credit cards are a very effective way to enhance your credit rating (as long as you keep within the agreed terms and conditions) but equally they can be very damaging if you miss payments and exceed agreed limits, which can prevent you having credit in the future. Equally, not having a credit history can also be damaging as credit providers cannot evidence your track record to make payments. So if you’re considering buying a house one day or making a larger purchase with the benefit of a loan, building your credit rating with a credit card can be very useful.