We all want to give our credit score a boost one perfect way to do that is by the smart use of credit cards. Regardless if your credit score is sky high or down in the dumps there are ways to leverage the inherent power of credit cards to raise your score.
The Easiest Change You Can Make
Everyone loves easy and nothing can be easier then to simply change the way you use your card. Sure they might be credit meaning you are borrowing money now to pay it back later but you do not have to use them that way. Start thinking of your cards as more of a debit versus credit style card. The beauty of your card comes in the form of letting you spend now and pay later. A debit card withdraws money from your existing account. This will require you to make a budget one that keeps track of the money in your account as well as keep track of money you are spending. Not all cards post balances right away once your balance is posted pay it off straight away. This will keep your balances at zero at all times. You wont be running into any trouble with overdue interest charges as well as any late payment charges and fees that get added when your balance due is not paid. This will also require discipline to pay off any and all charges as soon as they are posted.
Use Credit Utilization To Your Advantage
When it comes to using credit cards effectively you will always want to keep credit utilization in mind. To understand how to take advantage of it you need to know what it is. Its a pretty simple concept actually its only a ratio of your current outstanding card balances compared to all of the total credit limits. A simple example to illustrate this will help to make the point crystal clear. We shall assume for this illustration that all of your cards combined have a credit limit of $1000. You have spent $500 of that amount on purchases. This means you are using 50% of your credit.
So knowing what it is can be wonderful but how do you use this to your advantage. Think of credit utilization like a gas tank the less you spend the more full your utilization is. The fuller your gas tank the longer you can go without refilling. Financial experts recommend that you try to stay in the 10% to 30% credit utilization ratio. Instead of going that high you should consider making it even more effective with keeping it below 10%. While this may seem difficult it really is not. Pre plan your purchases and paying your balances off right away will keep you in line to make this work to your advantage.
When You Pay And How Much You Pay Is Critical
It has been mentioned already regarding payment of any balances. This cannot be overstated however. If you follow this simple rule it will never fail you and keep your score rising and looking great. The phrase you should remember is “Pay your balances in Full Before the End Of Each Billing Cycle”.
While this can be difficult to do for many careful budgeting and preplanning how your money is spend is the key to making this work. Doing this can seem difficult at first but will easily become a routine once you get into the habit. This strategy keeps you out of any charges or penalties as well as keeping your credit utilization score in the range that helps you.
Accounts Should Not Be Closed
Along with credit utilization you will need to make sure not to close accounts. This will automatically lower the amount of credit you have not to mention it hurts your credit score. High interest cards can be replaced with lower interest ones if that makes you feel better. Some cards have an annual fee these are generally rewards cards. There are many online calculators that allow you to figure out if your annual card is worth it. You may have some cards that you find you just don’t use as much anymore. Again refrain from closing the account and instead use it once a year that way the account stays open.
Using your cards as tools to raise your credit score. These were just a few tips to do that. These are easy to follow methods that with a little due diligence and some budgeting will make it easier for you to get the best possible credit score.