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