Using A Credit Card to Improve Your Credit
If you use your credit card with prudence, then it exerts a positive influence on the parameters that go into your credit score. Hence, if you wish to build or rebuild your credit score, then one of the proven ways is getting a credit card and using it responsibly and regularly.
Clear your payments in time
Your credit score reflects how you manage your debts, i.e., borrowing funds and making repayments. If you wish to maintain a healthy credit score, it becomes imperative to keep a healthy record of on-time debt payments. A person who never had to indulge in repayments does not have an impressive credit rating. If you are one of those, it implies that you do not have any credit.
On the offset, that you are not shouldering the responsibility of paying out for loans, then you can fix credit fast. You can build an impressive credit score without going into debt. All you need to do is incur regular expenses on a credit card. Make sure that you payout your credit card bill on time. Such a practice is beneficial, as the card issuer will report your payments to the credit bureau.
Further, when you make full payments, you are free from paying surplus interests. Keep in mind that your payments history is the most important aspect of your FICO credit score contributing to around 35 percent. It is one of the best things for maintaining an untarnished and unblemished credit history.
The use of a credit card can be quite a temptation. It is so because your bank account balance does not change when you make a purchase. Only after making the payment of your credit card bill the money gets debited from your account. Hence, if you are not cautious, you can lose track of how much you are spending.
If you wish to improve credit score, it is a good practice to keep a limit on monthly expenditure. Irrespective of you are using credit cards or not it is important to know how much you can spend. Your expenditures should not compel you to borrow rather you should take it head-on and make full payment when the bill arrives. Your expenses must not compel you to pay high interests or carry forward an excessive balance.
While rebuilding credit after bankruptcy, the second most important factor is your FICO score. It amounts to around 30 percent of your score. Further, you have to consider how much you owe overall. FICO will check your credit utilization, which tantamounts to the total sum you owe as a percentage of your available credit.
Higher utilization is indicative of payment defaults. Hence, it is important to keep your credit card balance relatively low. It will render the much-needed impetus to your credit rating. Ideally, you are better off aiming for 30 percent or lower. Even if you pay your credit card bills in time, you may still have high a utilization rate which is not desirable. To keep your utilization rates low try to spend twice a month rather than waiting for your statement to come.