As far as your credit score is concerned, your wallet is all it takes for you to improve it. A big chunk of your credit score depends on paying your bills right on time and managing your debt. And while it may not be possible to be approved for mortgage or any other major loans if your credit is not so good, chances are there is one type of revolving credit you are managing right now. This is none other than your credit card. Let us tell you how to improve your credit score with a credit card.
When used the wrong way, your credit card can easily get you in serious trouble. However, when managed properly, your credit card can be a very powerful tool to prove your ability of handling debt.
Here are the top ways to use your credit card to improve your credit score.
Start with Credit Cards You are Qualified For
You can build your credit faster when you pay off unsecured credit card but if you are not qualified for one, you can begin with a secured credit card. What makes them different is that you will be required to use a cash deposit to back secured cards and this will serve as your credit limit. There are cards that can send your FICO score to you together with your monthly statement to help you track progress.
Avoid Collection If Possible
The moment a debt reaches the collection agency, it will stay on your record up to 7 years. But, when you manage to keep a clean payment record for one year or more, your score will surely improve. Sustained payments made on time will trump your previous credit history. The best method to avoid collection is by paying all your bills right on time and in full, if you can.
Make On-Time Credit Card Bill Payment
Pay off your other bills as well. Your payment history makes up 35% of your FICO Score, the largest chink, and takes patience to get it repaired. Timely and consistent payments are among the best things you can do for improving your score. A good tip to remember is to use auto-pay for your recurring bills when possible. You can also set reminders for several days before the due date of your bills.
Maintain Low Balance
Credit cards are like revolving debts that can have the biggest effect on your score. There is no need to pay off your balance completely every month just so you can establish a good payment history. However, keeping this as low as possible can help with the other big factor in the FICO Score. The Amounts Owed make up for 30% of the score. The good news is that it can be fixed easier than payment. Aside from maintaining your individual balances low, you can also pay down your credit card debt as a whole.
Your credit card can go a long way in helping you improve your credit score. Make sure you use it the right way for you to get the best out of that plastic card.