How to Use Credit Cards to Boost Credit Score?
1. Pay your bills timely
- Impact on Credit Score: Payment history is the most significant factor, accounting for 35% of your credit score.
- Strategy: Make sure to set up automatic payments or calendar reminders so you never miss a due date. One late payment can really affect your score.
2. Do not close old credit accounts
- Why It Matters: The length of your credit history counts for 15% of your credit score.
- Tip: Even if you never use an older card, keep it open unless it has high fees. Use it occasionally for small purchases to keep the account active.
3. Obtain New Credit Only Sparingly
- Reason: Every credit inquiry can lower your score a bit, and stays on your report for two years.
- Best Practice: Only request new cards when absolutely necessary and at least six months apart.
4. Use a Mix of Credit Types
- Explanation: Diverse credit profile, such as credit cards, auto loans, or mortgages, helps increase your credit score, but that only accounts for 10%.
- Caution: Do not take on unnecessary debt just to diversify.
5. Ask for credit limit increases
- Advantage: A higher credit limit also reduces the credit utilization ratio.
- How: Ask for an increase from your card issuer, especially since your income has increased or your financial situation has improved.
6. Use reward cards to your advantage
- Bonus: While building your credit score, you can earn cash back, travel points, or other rewards.
- Caution: Pay the balance in full every month to avoid interest charges.
7. Avoid Carrying Balances
- Myth: You don’t have to carry a balance in order to build credit.
- Fact: Paying off your balance in full each month demonstrates responsible credit management.
With these strategies, you will be able to use your credit cards to build and maintain a good credit score without pitfalls such as debt accumulation.
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