Your credit score is one of those things in life that is often neglected but can have a major impact on how you live your life. Since it isn’t always front and center, and you need to take action to find out the number, it’s easy to let it slide. Of course, the problem with letting it slide is that if it dips too low, you’ll have trouble when it comes to getting a car loan, a line of credit or a mortgage, or working on your debt resolution. Even if you aren’t refused, you will end up paying an interest rate that is higher than it needs to be.
If your credit score has taken a hit and you want to start building it back up, or if you’re relatively new to the world of credit, there are things you can do to build your score. One of these things is using credit cards to help build your credit score. While it may seem counterproductive to create more debt to build a favorable credit reputation, it’s how you use it that makes all the difference.
Starting Off Slow
If you are new to credit, or if you’ve hit some speed bumps in the past, you may want to start with a secured credit card. This type of card is valuable if you haven’t been able to get one for whatever reason. Basically, with a secured credit card, you put down a deposit, and that is your credit limit moving forward.
You can then use the card as you would a normal credit card, making purchases and making payments when your bill comes in. Making your payments on time with a secured credit card will help build your credit score back up. If you don’t pay, the credit company will use your deposit money, and your score will be negatively affected.
Getting Help from Family
Another way to use credit cards to help build your credit score is to get yourself added as an authorized user to someone else’s card. As long as the person’s card has a great credit history and you are serious about using it responsibly, it can be a beneficial tool. Piggybacking on another card is often done with a parent, spouse, sibling, or someone else where there is a great deal of trust.
Accepting Credit Increases
Welcoming credit increases to your existing credit cards can help to build your credit score, provided you don’t increase your spending, as a result. Having more credit available with more room on the card will improve your credit utilization rate, which is one of the major factors used to determine your credit score. As long as you use a smaller percentage of your overall credit limit, this strategy should work well.
Strategies to Stay on Track
If you find it challenging to keep up with payments, or the general details of your credit cards, you can make adjustments to make it easier. Forgetting to pay a bill or two might seem innocent enough, but your credit score may still be affected. If you are forgetful, try setting up automatic payments or make multiple payments during the billing cycle to stay on top of it.
If a strong credit score is your goal, you should also consider keeping older cards open and using them for lesser expenses. Sometimes, when people are offered new cards with more exciting perks, they close older accounts and use the new cards exclusively. Keep using the older ones and remember to pay them on time for best credit score benefits.