Despite what you have been told, a credit card can actually help build your credit. If you are committed to making timely payments every month and keeping your balances fairly low or non-existent, a credit card can successfully build your credit over time. It can lead to better credit offers and more favorable terms with higher limits.
First, understand that you do not need to spread yourself too thin. You do not need more than one credit card at a time. Too many open cards can reflect poorly on your credit and can be overwhelming when it comes time to pay your bills. Make sure to choose a credit card that is right for you. You will want the credit card with the lowest possible interest rate, fees, and penalties. While department store cards and gas cards can be tempting because of discounts they offer, beware of high interest rates you will be forced to pay when you don’t pay off your balance in full.
Second, when you are responsible about paying off your balance to the credit card company, the banks will often raise your credit limit. If you are not capable of curbing your spending and maintaining a low balance, you can contact the credit card company and ask to keep your balance the same. Keeping your credit limit a little lower will ensure you don’t spend uncontrollably and find yourself charging more than you can afford.
Next, pay off your balance in full every month. Don’t allow yourself to buy more than you can afford. Only purchase what you can pay for in full every month. The credit card companies make money by charging you interest and penalties on your remaining balance every month. Don’t fall prey and find yourself paying more than you owe by failing to pay in full and being faced with insurmountable interest and fees.
Lastly, prepaid credit cards are a great tool to boost your credit. Opening a prepaid card will help you learn how to use a credit card responsibly. You make a down payment on the card and that amount of money is used to pay off your balance in full at the end of the cycle. You won’t be allowed to charge more than the amount you put forward.
Using a credit card is a simple way to build your credit if you are a responsible consumer. Good credit can provide you with a lot more opportunity and can help you save money for the future. If you are in need of assistance with your credit or credit report and would like to speak with a licensed attorney, contact SmithMarco P.C. for a completely free case review.