How to improve your credit with a credit card
Everyone wants an excellent credit score for obvious reasons such as lower cost of borrowing, higher credit limits and a number of other perks that are made available to people with excellent credit. Unfortunately, due to unforeseen and unexpected circumstances our credit rating can a take hit. It doesn’t have to be a significant hit to ruin our credit score; a simple over sight on a single payment can sometimes take months to fix.
Credit scores are influenced by a variety of factors. To determine the right plan of action for rebuilding your credit, I advise you to read the following recommendations from GetMoney.com;
#1 Apply for a credit card you can qualify for
Every twelve months you can request a free credit report (TransUnion, Equifax, and Experian) from AnnualCreditReport.com to make sure everything is in order with all your accounts. Sometimes you may have an open balance that you’ve already paid-off or potentially a thirty day late that should have been removed.
After analyzing your credit report you’ll have a fairly accurate understanding of your credit status. If you have excellent credit, you’ll obviously be able to apply for the card of your choice. Things get a little complicated if you don’t have perfect credit and pose a potential risk to lenders and creditors. Some creditors provide credit to people with sub-par credit, but if your credit has a lot of blemishes, you should apply for a card that doesn’t require any credit.
#2 Stick withwhat you have
If you have an active credit card it is better to stick with it rather than applying for a new one while trying to improve your credit rating. Multiple applications will have an adverse effect on your credit rating and indicate that you are potentially a high risk and desperate borrower.
#3 Pay on time
The single key to having excellent credit is making on time payments. Not having a continuous history of making on time payments is almost as bad as having bad credit history. If the creditors don’t have any data to base their decision on, how can they rate your potential default risk. We advise you to apply for a credit card and start making purchases on that card every month. Be sure to pay off the card on a monthly basis. This shows budget responsibility and will help you establish credit.
#4 Set up payment reminders
Some creditors send emails and messages when it’s time for you to make a payment. The best option is to sign-up for auto payments and if you can’t afford to make full payments every month, some creditors offer a minimum payment option. Making minimum payments is not ideal, but it’s better than getting a ding on your credit.
#5 Treat it like a debit card
Treat your credit card like a debit card. Only purchase products that you need and can afford. It’s easy to get sucked into buying things you don’t need and can’t necessarily afford hoping to pay for them in the future. The problem with that mentality is that the debt keeps adding up and it may become too much to handle.
#6 Keep your balances low
It’s better to have multiple cards with low balances than having one card maxed out. Rule of thumb is to have balances under 60% of your available credit. That doesn’t mean the amount of debt will be over looked by creditors if you keep it under 60%. The creditors will generally look at your ability to repay all your debt and the debt to income ration prior to making a decision.
The best advice anyone can give you is, A) be responsible, B) stay within your budget and make all your payments on time.