Improving your credit rating (or credit history) with credit cards is something most people never consider. The same thing that gets credit card users in trouble can be the very thing that helps to improve the user’s credit rating. Some may not want to believe it, but using credit is the only way to improve credit ratings. It is important to use credit cards responsibility. Card users cannot just go out and use credit cards and never pay back those debts. The key to improving credit ratings is spending on the credit card and paying the monthly payments on time. An even better idea is to spend and pay off the balance before receiving the statement or once the statement is received.
Using Credit Cards to Improve Credit Score
Using credit is the key to improving credit. The following are tips to help improve credit scores:
Use Credit Cards to Pay Monthly Bills
Monthly bills—such as utilities, car payments, and mortgages—are recurring. Cardholders can use credit cards with available credit to pay all recurring monthly bills. As long as the credit cards are not close to the available limit or maxed out, the cardholder’s credit score improves. Paying the balance on or before the due date helps to raise the credit score even more.
Use Credit Cards Often
As long as a credit card account is open, the user must provide some level of credit card activity to improve credit scores. It is advised that users make purchases at least once every six month on each credit card. The amount of the transaction does not matter. Use the card and pay the balance as soon as the statement arrives.
Use One Credit Card and Put the Others Away
Using one credit card at a time makes it easy to monitor spending. Some people have more than one credit card account . It becomes hard to monitor the spending on multiple cards. Use one card and place the others in a secure place such as a safe of locked filing cabinet. Make sure that the cards have at least half of the maximum card amount available so that credit scores can improve.
Do Not Close Accounts
Even if credit cards are not used, do not close these accounts. Credit cards that cardholders have owned for 2 or more years can actually help credit scores, as long as payments are made on time. Closing these accounts may have an immediate consequence for credit scores. Usually, these accounts are removed from the credit reports very soon after the accounts close. This action may result in lower credit scores.
Maintain Low Balances
High credit card balances may cause a great deal of damage to credit scores. At least half of the credit limit should be available at any given time to help improve credit scores. Stop using these cards and pay the balances down before using again.
Credit scores determine if consumers receive credit from a lender. It also determines the interest rates that cardholders receive. Better credit ratings mean more opportunities for credit and lower interest rates, and cardholders can save more money with good credit scores.