At what age should you be living with less debt?

Unless you win a huge Lotto jackpot and manage your winnings exceptionally well, the chances are you are going to need credit some time in your life. Most people generally hope that by the time they are forty, or fifty, or sixty – or seventy at the very latest – they would be living with considerably less debt, or even be debt-free. The question you have to ask is whether actually becoming debt-free is always in your best interest. Certainly, paying off your home is a goal worth striving for. But if you manage credit wisely, you can actually make it work for you. It is often possible for consumers to take advantage of credit benefits such as the six month’s free credit facility offered by some stores. Is it really better to dip into your savings when the store’s credit facility does not cost you anything? Why not take advantage of the up to 55 day’s interest free credit you can get on most credit cards? Provided you pay the full amount (not just the minimum amount) owing on your credit card on time every month, your credit card will only cost you the monthly or annual fee. There are many benefits you can get from using the card – from free travel insurance and travel miles to store discounts – which can more than compensate for the cost of the card. However, you have to be extremely disciplined to make credit work for you. In order to qualify for credit at the best possible terms, you have to build and maintain a good credit record. That’s where many people make a mistake. They don’t start building a solid credit record early enough; and others, who have spent years, or even decades, maintaining a good record, allow it all to disappear when they eventually pay off all their debts and become debt-free. Pensioners, for example, who previously had impeccable credit record, may find it extremely difficult to obtain vehicle financing should their car need replacing. They may also not be able to stand surety for their child or grandchild’s credit application. Everyone should start building a credit record as early as possible and maintain this throughout your life. TransUnion suggests the following for starting out, or simply maintaining, your credit record:

  1. Apply for and maintain a store card or credit card with a low credit limit.
  2. Try to keep your balance on the card below 35 percent of your limit.
  3. If you have a credit card, try to pay the full amount owing every month to avoid paying interest.
  4. Ensure you repay the correct amount owing on all your accounts on time and in full every month – do not skip a month with the intention of making up the shortfall next month. Even this may reflect negatively on your Credit Report.
  5. Obtain your Free Credit Report from www.transunion.co.za or phone the TransUnion call centre on 0861 482 482. Every consumer is entitled to one free credit report from each of the credit bureaus, once every 12 months.