A credit card can be a helpful tool when you’re trying to reestablish your credit after a challenging period or trying to meet the requirements of another loan application. But using a credit card wisely is critical. While this tool can help you build your credit again and improve your score, it can also have the opposite effect if you’re careless about how and when you use it. With that in mind, here are five tips for using credit cards safely and responsibly so that they don’t hurt but instead help your credit score. Read on to learn more.
Check your credit score before applying
This is not particularly to improve your credit score, but it is a good practice to prevent it from going down. Before you apply for a new credit card, make sure you know where your credit score currently stands. You see, not every credit card application is considered a “soft” credit pull, meaning it might impact your score.
If you’re working to reestablish your creditworthiness or trying to qualify for a specific type of loan, a “hard” credit pull will be required by the provider. A hard credit pull will affect your credit score, so you want to make sure that you avoid applying for more credit cards or loans than you can handle. There are several ways online to check your credit score with a soft pull. You can also ask your lender if they offer credit scoring services, or you can visit a financial institution like your local bank to get your score.
Only apply for new cards you really need
When you’re trying to reestablish your credit, it can be tempting to apply for new cards. But this can lead to causing you more harm than good. Before you apply for a new card, make sure you really need it. Excessive credit card use can lower your credit score, so if you apply for more cards than you actually need, it can be counterproductive.
Only apply for a new card if you have a particular need that isn’t being met by an existing card. If you’re putting in efforts to build your credit, you will be better off utilizing the card you currently have than applying for a new one. Focusing on meeting your current financial obligations will improve your credit score faster than applying for multiple new cards.
Use only 30% or less of your credit limit
In general, you should try to keep your credit card balance below 30% of your limit. However, if you are trying to reestablish your credit, you should definitely keep it at 30% or less at all times. It is important to note that this percentage is related to your overall credit limit across all cards you have on all cards, not just one card in particular. Keep track of your credit card balance and payment due dates as best you can. The more responsible you are with your credit card use, the faster your score will improve.
If you happen to have a less-than-ideal credit score, you should pay at least the minimum amount due each month. This will portray to the credit card companies that you are able to manage your credit responsibly and that you are worthy of a higher score in the future.
Pay your bills on time and in full each month
Credit card companies require you to see that you are responsible enough to pay your bills on time and in full. This shows that you are likely to repay your debts, and it will help your credit score. If you are able to make your credit card payments on time and in full each month, you’re likely to see a significant improvement in your credit score.
If you are having trouble paying your bills on time, then seek credit counseling as soon as possible. It can be preferable to speak with a credit counselor who can help you understand your credit. They can also help you out with proper budgeting and set up a payment plan so that you can pay off your debt and improve your credit score.
Don’t mix credit card usage with payday loans or other bad habits
There are many ways to reestablish your credit, but you have to choose them wisely. It would be best if you avoided habits that will hurt your credit score, like missing payments or applying for too many credit cards. You should also avoid practices that could lead to adverse financial consequences, like applying for too many credit cards.
You may have heard that you should get as many credit cards as possible and use them all frequently. But this can actually hurt your credit score. Having a large amount of credit open at once can indicate to creditors that you are desperate for money and that you are likely to be delinquent on payments. Only open new accounts if you have a legitimate reason to do so, and you can keep on top of all the expenses.
Conclusion
A credit card can prove to be an excellent financial tool, but only if you use it responsibly. Improving your credit score is a great reason to pick up a credit card, but only if you use it in a way that will help your score. To do that, make sure you check your credit score first. Next, only open new accounts if you have a legitimate reason to do so. Finally, make sure you only use 30% or less of your credit limit, pay your bills on time and in full each month, and don’t mix credit card usage with payday loans or other bad habits.
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