Credit cards can help you to build a solid financial rating – or they can destroy it. The choice is yours.
How Credit Card Use Affects Your Credit Score
First of all one needs to be responsible while using his/her credit card and should avoid any unnecessary debt on their heads. This article tells you how to use credit cards to your advantage and hoe to increase your credit score. When it comes to credit cards, preferable one needs to have 3-5 credit cards max, which include Visa and MasterCard and not department store credit cards because you can use these cards anywhere you desire. The main problem with department store credit cards is that one can only use them at certain stores, which places the user at a big disadvantage.
Instead of pulling out your debit cards or cash, use your credit card to buy day to day items like groceries, bills, food and other utilities. Another rule of thumb is that one should never go above 25% of that credit cards limit. So if it’s a $300 limit then you should probably not go above $75. If you are a frequent spender and cannot limit yourself to 25% of the limit then one can try to pay the credit card bill more than once a month.
As soon as one reaches the 25% limit then they should pay their credit card bill immediately, then go back out next week and again use your card. One may look at this as a tedious task to pay his/her credit cards bill more than once a month but this technique helps to keep you ahead in the credit card game. If one does not use his credit cards very often or not at all, then he/she is at a big disadvantage.
One should try to use their card at least once a month to stay in the credit game and attain the highest score possible. Another rule of thumb that one should keep in mind is history of that card. One should have that particular card for at least four years, which means 48 months of good history.
If you don’t have that history, you can build it up eventually. Another question that bugs people who have many cards is that “should I close my accounts” or “should I cancel some of my cards?”. One can cancel those unwanted cards, but before you do make sure that your other cards which you use have at least 2-4 years of good history.
Another important thing you should keep in mind is never cancel multiple cards (more than 5) at the same time. You should cancel one card at a time every 3-4 months. So if you have a bunch of cards you want to cancel, it may take at least a year to do so. Thus by keeping all these points in mind credit cards can build your credit score.