As you take on debt, it affects your credit, but your credit is also what allows you to take on debt. Clear as mud, right? Learn about the relationship between credit and debt with our five tips for how to use credit wisely.

Lesley breaks it down in this short video:

Step 1: Pick a credit card that works for you.

When you’re looking at credit cards, it’s important to explore all your options. Compare interest rates and fees. Do your research before you apply. Pick a card with the right benefits and rewards for your lifestyle. You can earn cash back, airline miles, or discount points at places you already shop. Think about things you would buy anyway, not just because you have a credit card. The smarter you are when picking out a card, the more you can gain and save from its benefits. ​

Step 2: Check your credit report at least once a year.

Know where you stand. Monitor your credit by checking your score at least once a year. You’re entitled to a free report every year from each of the three credit bureaus. You can also check your credit score in the GSB Mobile App as often as you’d like without impacting your score. You can set alerts to help prevent identity theft and discover potential fraud.

 Step 3: Take on healthy debt to build the life you want.

The better your credit score is, the less expensive new debt is going to be. Make sure you’re continuing to build your credit by only taking on debt that benefits you and your goals. Your debt and your ability to pay it down should help improve your financial situation, not hinder it.

For example, an interest rate that’s slightly higher because you let your credit score slide won’t affect your monthly payment dramatically, but in the long run, it could add a significant balance to the loan. As your credit score improves, always think about refinancing debt to save money on interest.

Step 4: Focus on savings before paying extra on debt.

Building your emergency savings should always come before paying extra on debt. Debt tends to cause anxiety, so this may not feel natural, but think about the big picture. If you couldn’t take care of an emergency that popped up – and they always happen when you least expect it – you’ll have to take on more debt to cover those costs. You want to be able to cover emergencies with savings, so you don’t have to take on an extra loan. Build your emergency savings first, then tackle paying off debt.

Our Personal Finance tool in Online Banking and the GSB Mobile App can help you create a budget to manage your debt. You can even play around with monthly payments, interest rates, and different approaches to determine the best plan for tackling one debt at time.

Step 5: Make more than the minimum payment.

Finally, remember maintaining your credit includes managing your debt. Be careful not to spend outside your means. Your monthly payment for any debt you take out must fit into your budget but make it your goal to pay credit card balances to zero each month. I know this isn’t always possible, but when you can, make more than the minimum payment or pay your balances in full. Just an extra $10 each payment can make a big difference over time.