Building your credit score may seem like an impossible feat. In a world where consumers live and survive on credit, when you have none or have negative credit, buying necessities can be difficult. Using a credit card is a sure fire way to improve or damage your score, depending on how you manage it. While improving your credit score with a credit card may take a decent amount of time and effort, following these steps will ensure your success.
First, if you have a low credit score due to a lack of credit history, consider opening up a low balance credit card. If you are just beginning to build your credit, start with a secured credit card. A secured credit card is a card that is secured with a mandatory cash deposit. A secured card is used like a credit card but is really more like a debit card because the money to pay for what you charge is already held in the account. Almost any consumer can be approved for a secured credit card and as long as it is reported on your credit file, it will help boost your score.
Another option for consumers with little or no credit it to ask a parent or relative to make you a joint user on one of their cards. Make sure the individual you are sharing the card with has good credit and is responsible about repayment or you could further damage your score instead of improving it.
A third way to boost your credit score with a credit card is to maintain a low balance. Using your credit responsibly is the simplest way to ensure your score does not suffer – and in fact increases. A major factor in determining your credit score is how much available credit you have versus how much credit you have actually used. The smaller the ratio, the higher your credit score. Ideally, keeping your percentage at or under 50% of your credit limit will help raise your score, although this may not be possible for many consumers. If you need to charge more than 50% of your available credit limit, try to pay off your balance in full every month.
A fourth way to boost your score with a credit card is to limit the number of cards you are carrying. When determining your credit score, the credit companies consider the number of credit cards and your balances. If you have several cards, even with a nominal balance, it may be best to pay off the small balances and try using fewer cards. When deciding which card to use regularly, choose the card with the most favorable interest rates and the highest credit limit.
Lastly, after paying off your credit card debt, make sure to leave the positive accounts on your report. Do that by not closing the account. Though you may not use the card, and maintain a zero balance, leave the account open. The more positive credit history you have the better your credit score.
Applying for and using a credit card should be well thought out as it is a serious decision and takes a responsible consumer to ensure it does not do long term damage to your credit. If you are having issues with your credit report as a result of your credit card(s) contact SmithMarco P.C. for a completely free case review.