Today, more and more aspects of our lives depend on our having an acceptable credit score. Our credit standing affects where we live, the kind of car we drive, the kind of jobs we end up having, our ability to start a business, and even our monthly bills.
Using a card responsibly is one of the easiest ways to build credit. Today, we’ll be going through some of the ways a card can help you establish an outstanding history.
Why You Should Build Credit With A Credit Card
While it is possible to build good credit without a card, having one will certainly work wonders for your score. They are a great addition to other credit-building methods like paying loans, mortgages, or rent on time. Many also don’t have annual fees so you can get them practically for free.
Having a credit card can and will affect your credit score in many ways. Factors such as whether or not your card application was approved and if you pay your bills on time can make or break your credit standing.
What’s more, these little rectangular pieces of plastic do more than just improve your credit score. They afford you buying power, security, and limited liability which makes them a useful personal finance tool.
Furthermore, if you have the right card, you can get access to perks such as cashback, discounts, and other purchase benefits such as extended warranties and insurance for travel.
If you don’t know much about your credit you can get a free online credit evaluation to get started.
Easy Ways To Build Credit With A Credit Card
Pay On Time And In Full Every Time
Did you know that your payment history affects 35% of your score? To build good credit, you need to have a record of on-time debt payments. This means you have to pay any existing loans and mortgages on time every time.
Another way to achieve this is to use your card to pay for regular expenses and paying off your bill in full and on time every month. This compels your card issuer to report this to the bureaus which helps boost your score.
What’s more, if you pay on time and in full, you won’t have to deal with interest which can raise your bill drastically each month. Keep this at the forefront of your mind when trying to build credit with a credit card.
Don’t Overspend
Overspending is one of the potential dangers of having a card. It can sometimes be difficult to track how much you’re spending until it’s time to check your monthly bill and pay off your balance.
With this in mind, it’s always helpful to keep a budget even if you are using your card. Your mindset should be if you can’t pay your card on time and in full because of a purchase you make, then you probably shouldn’t swipe that card.
You might also like: 4 Best Credit Monitoring Apps & They’re FREE!
Keep Your Balance Low
The amount you owe often accounts for 30 percent of your score. The main reporting bureaus call this credit utilization and it measures the amount of available credit you are using.
By keeping your balance low or even non-existent, your utilization score drops which helps improve your overall score. More importantly, it ensures that you can pay your balance in full every month.
Keep Old Accounts Open
If you have old card accounts, don’t close them just yet. Keep them open so you can keep a longer history.
Most scoring models take the average age of all your accounts into consideration to determine your history so having your oldest accounts active can boost your score. What’s more, a lengthy history tells lenders that you have predictable and reliable re-payment habits.
Having good credit can open up many opportunities for you in terms of building your future. With the right attitude and with proper use, a card can boost your score dramatically and can even rebuild your standing. I hope the tips above can help you get started building or rebuilding a desirable standing for you.
Did you find this helpful? Don’t forget to share it with your friends and family, also share any tips for how to build credit with a credit card you have in the comments below!
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