Lesson 5: Credit without the trap

Credit is a tool that most people meet as a trap. The difference is entirely in how you use it.

The score

Credit bureaus (TransUnion, Experian, XDS) track every account you have. What moves the score, roughly in order: paying on time (most of the game), how much of your limits you use (stay under about a third), age of accounts, and how often you apply. You're entitled to a free report from each bureau every year — checking your own never hurts it.

Counter-intuitively, a blank record is a problem too: lenders can't price the unknown. A phone contract or low-limit card, settled in full monthly, builds a perfect file at zero cost. Interest paid earns you nothing.

Good debt, expensive debt

Debt isn't one thing — it's priced:

• Cheap-ish and productive: home loans, some student debt — long-term assets at lower rates
• Middle: car finance — necessary for many, dangerous with balloons and 72-month terms
• Expensive: credit cards revolved month to month, store accounts (20%+)
• Radioactive: payday loans, informal loans — rates that can double your debt in months

The question is never "can I get the credit?" — it's "what does this rand of debt cost per year?"

If you're already in it

Attack the highest interest rate first while paying minimums on the rest (the avalanche — mathematically fastest). Don't take new debt to feel better about old debt. If it's truly unmanageable, debt counselling is a legal protection, not a failure — but it flags your record until cleared, so it's a serious step.

The habit that makes credit safe

One rule does most of the work: never spend on credit what you couldn't pay cash for this month. Credit then becomes what it should be — a convenience and a record-builder, while your actual wealth grows in your TFSA and retirement fund.