Credit plays an important part in the financial world.  Navy  personnel  should  use  it  wisely  and carefully,  heeding  the  following  principles: · · · · · · · Use credit for those necessary goods that you   cannot   afford   with   one   or   two paychecks. Use  credit  mainly  for  goods  that  have  a useful life longer than the time needed to pay  for  them. Make as large a down payment as possible. This   reduces   the   total   amount   spent because  of  interest  charges. Know  what  your  income  will  be.  Set  a spending   limit   equal   to   the   smallest paycheck  received  to  be  sure  of  having enough money to meet the payment when due. Don’t   buy   another   item   on   credit   just because you have finished paying for one. Avoid  the  temptation  to  use  credit  for splurging. For example, buying too much on credit at Christmas becomes a shock in January  when  you  receive  the  bills. Check with consumer affairs offices about local  credit  regulations.  For  example,  some states allow up to 3 days to change your mind  on  a  credit  purchase  or  a  loan received. You  should  remind  your  people  that,  when using  credit,  they  should  remember  the  follow- ing  basic  principles: Credit costs money, but many credit plans exist. Some plans are much less expensive than  others.  As  people  shop  for  the  best bargain  when  buying  a  car  or  furniture, they  should  shop  for  the  best  bargain  in credit. Consider carefully before borrowing from finance companies. These companies often charge  higher  rates  on  loans. The  faster  a  person  pays  off  a  debt,  the less interest charges he or she will pay. Use credit only for unforseen emergencies and  for  higher-cost  purchases,  such  as furniture,  cars,  or  houses. While buying on credit has certain advantages, personnel also need to recognize some problems involved in using credit. The following are some of  the · · · · · · problems  you  may  encounter: Credit  customers  may  overbuy. Credit  customers  may  buy  at  the  wrong time  or  place. Credit  prices  may  be  higher  than  cash prices. Credit  ties  up  future  income. Payments  must  be  made  on  time. Because  of  the  addition  of  interest  charges to  the  price,  the  purchase  costs  more. CREDIT  RATING.  —Most  people  find  it advantageous  to  establish  a  good  credit  rating. Some people object to buying anything on credit and insist on paying for everything in cash. They save  until  they  have  the  cash  to  make  a  major purchase,  and  they  often  do  get  better  buys  for cash. However, a good credit rating is like money in  the  bank.  When  people  have  a  good  credit rating, it means that they pay their bills on time. Navy  personnel  usually  have  a  good  credit  reputa- tion and should have no problem getting a loan or credit when needed. A good credit rating can be  priceless  in  an  emergency  such  as  a  medical crisis,  fire,  or  death  in  the  family. You  can  establish  a  good  credit  rating  by paying   for   time   purchases   according   to   the purchase agreement. Time purchases include items such  as  furniture  or  cars  and  items  bought  on credit  card  accounts.  You  can  also  establish  credit by repaying a loan from a bank or a credit union according  to  the  loan  agreement.  Making  these payments  according  to-their  agreements  means that you pay the amount agreed upon by a certain date. You can then use these companies, banks, or credit unions as credit references if you apply for  credit  at  any  future  time. COST OF CREDIT. —Have you ever rented a  motorcycle  or  sailboat?  You  always  know  in advance that it will cost you so much an hour or day.  The  rent  or  cost  of  using  the  bike  or  boat has  its  base  on  length  of  use. The  rent  paid  for  using  borrowed  money  or credit  is  interest.  You  may  sometimes  have difficulty   figuring   interest.   Some   lenders   and 4-15