Anyone who uses credit cards responsibly will improve their credit score. I did it and so can you.
How I used credit cards to build my credit rating
Although I did not require a loan that badly, but my friends told that, I may need a loan at some point of time in future for host of works such as purchasing a car. I was also advised to use credit cards to build my credit rating as an easier means of starting my credit history on a positive note.
When I researched for the types of credit cards to build my credit rating, I found that secured credit cards were comparatively easier for me to get. Usually, credit cards are approved for the people who have good to excellent credit rating, which I did not have. I did not have to go through many formalities with the credit cards issuer company.
This is because they took a certain amount from me as deposit against the credit cards. These are secured credit cards involving an amount of cash as deposit that the company will treat as collateral. The company has no risks in issuing these cards to people like me who have no credit history.
The amount I deposited with the company to issue me secured credit card to build my credit rating was my credit limit. This means that my limit to purchase the things from the card was restricted by the deposit with the company. Even people with bad credit history can use these cards to improve their credit rating.
However, I wanted to ensure a good credit history. Hence, I used the secured credit card in a very restricted manner and bought the things only when I did not have cash in hands. Smaller purchasing from the card kept my payments to the card issuing company very low and I made the payments always on the scheduled date.
Another thing that I ensured while I build my credit rating was that the company reported my timely payments to the credit rating agencies or bureaus. These bureaus keep a record of your payment and it is what we call a credit history. A person is given a credit score or credit rating based on the credit record. In few months, I had a decent credit rating against my name in an easier way.
Advice for maintaining a good credit rating
1. Save money to pay off loan installments on time
2. Use your credit cards sparingly to avoid huge and unaffordable payments
3. Make a budget and keep your spending within limits.