Sensible debt should be part of any financial strategy. Healthy debt enables you to enjoy things that might otherwise be beyond your reach, and it can also help your overall credit score. But, obviously, borrowing has an ugly side as well. Too much, too expensive or the wrong kinds of debt can make life miserable. So, where do you start?

Start with the basics. Borrowing costs money. That isn’t necessarily bad. It just means that when you pay it back, you have to pay more than you borrowed. So, how do you create a good debt strategy?

Start by choosing when and what to borrow carefully based on your wants and needs. Search for the best interest rates and terms and be sure you’re signing up for what you can actually do. People often get into trouble when they agree to rates and terms that they’ll have a hard time being responsible for.

It can be hard, but that means being honest about whether what you’re borrowing for is a necessity or a luxury. Be sure to prioritize your borrowing. What items do you actually need and how extravagant to you really need to get? Also, be sure to reserve some borrowing capacity for emergencies. Maybe you keep one credit card free for unexpected costs.

A big part of your credit habit should be revisiting what you’ve got. This isn’t a set it and forget it situation. Periodically, review your debt. Refinancing your mortgage or auto loan can help save you money in the long run.

So, how do you consider the options? Comparing credit cards can be confusing. You have to consider interest rates, fees and associated benefits. The right card should reflect how you use it. If you pay the full balance monthly, the interest rate isn’t as much of a concern. Focus on any annual fee and those extra benefits like airline miles. On the other hand, if you carry over balances, shop around for the best interest rate.

For long-term debt, like a mortgage, consider interest rate, length, and down payment requirements that fit your situation. Adjustable rate mortgages usually have lower rates, but your payments may increase. Long-term mortgages usually lock a higher rate. If you expect to stay in one location only a few years, an adjustable rate mortgage may be best. If an increase in monthly payments would be too painful, look at a fixed rate mortgage or an adjustable one with rate adjustment limits.

Weigh your options based on long-term value. Some debt just makes sense. If you’re looking to buy a house, or pay for college, those are hard items to pay for out of pocket. Some debt, like expensive jewelry or an extravagant vacation, may not be within reach, but also may not be worth the incurred cost of that debt. These are decisions you’ll have to make for yourself, but one technique for deciding is to think of the long-term value you get from that investment. Obviously, your college education is going to give you more long term value than some other things you can go into debt for.

Why does good credit matter? A good credit record does more than just make future credit approval easier (although, that’s a big part of it). Lenders also use your credit record to determine credit limits and what rates to charge. Ultimately, a good credit record will save you money.

And, checking your credit report is easier than you think. Everyone is entitled to a free credit report once a year. So, request your free report at, or order a report from one of the three large credit reporting agencies, and get familiar with where you stand.

Don’t ignore it when you’ve gone too far. One of the worst things you can do for your credit is to ignore bad habits. It’s harder to turn things around once you’re in over your head than to take action when you first see red flags. Take action immediately if your borrowing is getting out of control. Reign in your spending and credit card usage immediately if you feel you’ve gone too far.

When you borrow for the right reasons, and stick to your repayment schedule, you create a healthy credit history. Making smart borrowing decisions can help you take control of your financial future.