7 tips to utilise credit for good financial health in 2023

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With rising living costs expected to continuously rise into 2023, gaining better control of finances is a top priority for many in the new year. Credit can be used to unlock a wide variety of benefits and savings, and an expert has explained the importance of sensibly utilising it “sooner” rather than later to reap the rewards.

Tim Chong, co-founder and CEO of Yonder, told Express.co.uk: “Younger generations have been scared off of credit thanks to predatory lending practices from legacy credit providers, meaning a whole generation of consumers are missing out on the greater benefits of responsible use of credit.”

Mr Chong continued: “Younger people could find it harder to secure mortgages and other credit products in the future if they avoid all credit usage now. Consumers of all ages need to embrace financial literacy to build confidence and understanding of their finances so they can reduce stress and worry over money.

“The sooner individuals do this, the better equipped they will be to enjoy many of the opportunities that come with having a good financial education.”

There are a number of key tips to remember when it comes to improving and using credit to nurture better financial health in the new year, and here are seven of them.

Have bills in your name

To start building up a credit score, people should make sure to have some bills, like an energy or phone bill, in their name, Mr Chong suggested.

He explained that by doing this, people “can start to establish a credit rating” with “regular, on-time” payments.

Move daily spending to a credit card

Moving daily spending to a credit card can also start to build up a credit rating over time.

Mr Chong said: “If you use a credit card responsibly, your credit score can improve, and you could qualify for better deals, a higher credit limit and lower rates. Having a good credit score will give you the financial freedom to not only improve your credit limit but to apply for your desired mortgage and for bigger loans – products that will make a real difference to your life.”

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As well as building up a credit record, switching daily spending to a credit card means purchases will be “far more” protected than if a debit card would be used.

Mr Chong explained: “If a supplier goes out of business, under the purchase protection Section 75 law, your credit card provider will most likely be able to get your money back.”

As well as this, Mr Chong continued: “If you have a credit card that rewards you as you spend, you can earn things like cash back or points to put towards future purchases, flights and dining.”

Choose a beneficial credit card

There are a variety of different credit cards on offer, and some, as mentioned, offer different perks like cash back, points and discounts.

However, Mr Chong suggested: “Research credit cards that offer rewards that are interesting to you, so you can earn back additional value while spending that you won’t get when using debit cards.”

Utilise free credit score trackers

People can gain better control of their rating by signing up for a free credit score tracker like Credit Karma or Clearscore, to work out where and if they may need to improve.

Mr Chong said: “You can check your score for free without impacting it and follow their advice to improve it over time.”

Don’t apply for new credit products too often

People should be aware of how often they apply for new credit products, as regularly applying for new types of credit could result in multiple ‘hard’ checks against their credit file.

Mr Chong explained: “Hard checks on your credit score could make lenders and banks assume you are a high-risk applicant, either that you are short on cash or that you are racking up a lot of debt.”

Regularly assess finances

Sit down at the end of the month to read through credit card or debit card transactions to make sure they all look right and if anything looks off, people should in touch with their provider.

Mr Chong explained: “By staying on top of your bank statements, you are more likely to prevent overpaying for products and services that you no longer use or require, whilst also keeping an eye on unusual activity.”

He said that keeping an eye on what is in your account month to month also means people are “less likely” to constantly dip into their overdraft, which is what lenders will be “looking out for” when trying to determine whether the person is a reliable borrower.

Ask for help

If someone is having trouble making payments, they should always speak to their provider about the difficulties.

Mr Chong explained: “Talking to your credit card company is the best way to get back on track with your payments.”

This is because often, they can help out by setting up plans for people to pay off what they owe in more manageable instalments.

Mr Chong continued: “Your bank or credit provider is on your side and wants to help minimise the mental and financial stress you may have felt if you had instead ignored the problem.”

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