If your credit score needs a boost, pulling out your credit card might be the farthest thing from your mind. However, a credit card isn’t only helpful in a financial emergency. Using a credit card can boost your personal rating, and with a higher rating, it’s easier to get auto loans and home loans.
But it takes more than acquiring a credit card to raise your score. It’s all about responsible use. Here are four ways to improve your credit score with a credit card.
Re-active your credit card or apply for an account.
Some people stash their paid off credit cards in a drawer and only pull them out in an emergency. This is an excellent way to avoid consumer debt, but it doesn’t help your credit score. If you go more than six months without using your credit card, your creditor may stop reporting your activity. Contact your credit card company to reactivate any inactive card. This is fairly simple, and in most cases, you only need to verify your personal information.
If you don’t have a credit card, talk to your bank about a secured credit card. These credit cards are perfect for establishing or rebuilding a credit, as they don’t require a credit history or good credit.
Use your credit card.
Once you have an active credit card account, use this card for small purchases. Don’t charge a lot, as this is likely to increase your debt and make repayment difficult. Give yourself a reasonable spending budget each month. For example, you might use the card to buy groceries or cover your monthly transportation costs.
Don’t carry a balance.
A credit card can make or break your credit score. Remember, boosting your score with a card is all about responsible use. For this matter, you shouldn’t max out your credit card. To keep your debt in check and slowly improve your personal rating, always pay off your balance in full each month. For this approach to work, only charge what you can afford to pay within a month.
Not only should you pay your balances each month, you should pay your credit card on time. Timeliness is the biggest factor influencing your credit score, accounting for 35% of your personal rating. It goes without saying that skipping payments can drop your score.
Stay organize and always be aware of your due dates. Set up email or text reminders, or sign up for automated bill pay and never miss a payment.
Adhere to the 30% rule.
Certain situations may prevent paying your balance in full each month. For example, you might use your credit card for a large purchase and repay the debt over several months. This is okay. But even with a repayment plan in place, avoid using your entire credit limit. A high credit utilization ratio is a credit score killer. As a general rule, if you’re going to carry a balance, keep this balance below 30% of your credit limit.