Here at Financial Helpers, we write a lot of articles that might seem to demonize credit card use. From our experience, a lot of people find themselves heaped in credit card debt they can’t seem to overcome, so they come to us for help.
But that doesn’t mean we’re anti-credit card. A credit card can be a very good thing for someone who is looking for ways to improve their credit. Having smart usage for a certain amount of time can make life a lot simpler down the line.
The better your credit score, the easier it will be to get approved for a car loan, mortgage, and so much more. Not only will it be easier to get approved, you’ll have lower payments than people who have bad credit, as you’ll be seen as more trustworthy.
Having a good credit score is a great thing and being smart with your credit card is the best way to get there. Let’s look at 6 strategies you can use to improve your credit score.
1) Don’t Miss Any Payments
If you struggle to pay your bills on time, then getting a credit card isn’t for you. A necessary tactic in remaining in good standing with any company that offers you a credit card is to pay your FULL balance on-time every month. One important ingredient to a good credit score is having a decent record showing that you make on-time payments.
This one factor makes up 35% of your FICO score, so by missing payments, it can take a huge chunk out of your overall score. That’s why it’s better not to get a card at this time if you’re not financially stable enough to pay regularly. Also, paying in full will cancel out interest on those payments!
2) Use it Like a Debit Card
The safest way to use a credit card is to manage it like a debit card. One of the dangers of swiping credit is you can’t just look at your bank balance to see how much you have left. The money doesn’t actually come out of your account until later when you pay your bill.
Don’t lose track of what you’ve spent and definitely only use what you can afford to pay back in full. A lot of people get into trouble going overboard and when they can’t pay it all back, try to skate by paying the minimums. Then, by the next month, they have an even higher balance to pay and it can get out of control quickly.
3) Keep a Low Balance
30% of your credit score is determined by how much you owe. As we stated in point #2, if you spend way more than you can afford, that high balance will transfer into the next month and will reflect negatively towards your overall score.
The best way to use a credit card to build credit is to NOT use it every single day. Use your debit card as much as you can, but make occasional, smaller purchases with your credit so it’s easier to pay back. With a low balance and good record of repayment, your score will go up.
4) Look at Your Options
There are a variety of different credit cards for you to choose from. If you already have good credit, then it should be no problem getting hooked up with the best cards on the market. If you’re credit is bad and you’re looking for a way to improve it, there are other types available designed to help you do just that.
Some cards are pre-paid, meaning you’ll have to make a down payment first. If for whatever reason you don’t pay your bill, they will just take what you prepaid. If you stay on top of your bills and do well, that money is often refunded to you. They may also have high interest, but it’s a great way to get started. Find the right card that best fits what you need.
5) Be Smart!
Once again, we only advocate smart credit card use. If you know you have a bed record of repayment, having a credit card can only cause a lot of problems for you in the future and make things worse. But, with smart use, life will become easier. Don’t get yourself caught up buying things you can’t afford and racking up tons of debt.