Have you recently received your first salary? Are you itching to head to the shops and spend your hard earned money on a treat for yourself?

You might find that now that you are earning a salary you are being approached by various credit providers with appealing offers for store cards and credit cards. You might be tempted to take up these offers so you can spoil yourself to a new outfit or a new cellphone.

But remember there is both ‘good’ and ‘bad’ credit. ‘Good’ credit is when you take credit for something that gains value like a home or student loan while ‘bad’ credit is when you take credit from things you don’t really need like a new TV.

When you take credit you must be careful as it can end up costing you much more than if you paid cash. If you don’t manage your spending you might get into a lot of debt and struggle to meet your monthly repayments.

There are two types of credit:

1. Short-term credit: this is when the lender expects repayments over a short period for example on a store card.
2. Long-term: this is when the lender expects regular repayments over a longer-period for example on a car or home loan

When you take our credit remember that you are agreeing to:

1. Pay on time
2. Pay the minimum amount due (but more if you can)
3. Pay the interest as well as the original amount due

Taking credit is a big decision so remember to ask:

• Can I afford the repayments, within my budget?
• How much will I be paying in total, including the interest, any service fees etc?
• Are there are penalties or rewards for repaying the debt earlier?

If you don’t understand the credit agreement you can ask to get a print-out with all the costs, you can also request a copy of the contract, so you can take it home and read it carefully before you sign it.

Credit can be very handy but remember these golden rules:

• Avoid borrowing money for non-essential items
• Where possible, save some money to pay a deposit
• Where possible, save until you can afford to pay for the item in cash, this will save you money in the long run.

Also remember that every time that you take credit, it is recorded on your credit profile which is held by credit bureaus. Your credit profile is a snapshot of how you manage your debt and it lists every purchase as well as if you pay on time or not. You can check your credit report for free once a year. This is a useful way to keep track of how you are managing your debt and if you need to take action to improve your credit profile. Learn more about credit profiles and debt management here.

By using credit responsibly you can invest in your future and avoid becoming over indebted, which leaves you room to save and invest to build your wealth over time.