tvIt is common to find people not using their credit cards to make any purchases for fear they will fall into debt. If you are only using your credit cards once in order to avoid hurting your credit score, you will probably end up losing it. Inactive credit has an impact on your credit score and credit utilization too.
When you apply for credit, the financial institution expects you to repay. The companies are able to make money from the interest charged. When you don’t keep your credit active, your credit score will end up being hurt.
So, how do you avoid this? Here are money management tips of how to avoid inactive credit from hurting your score.
Use your credit card frequently
As said earlier, credit card companies are in business to make money. They issue the cards to users expecting the credit extended is repaid.
The one thing they know is that most people are unable to repay within the first month. Due to this, interest will be charged and that’s how the credit card companies make money. In order to avoid your inactive credit cards from hurting your credit score, you need to use the card(s) frequently.
You can make small purchases like filling up your car, shopping for items or settling bills. The key to better use is simple – use your card responsibly by making purchases that are necessary.
Use your card and pay it off immediately
When you use your credit card to make any purchases, you can pay it off immediately. What this does for you is reset the activity on your credit card. Ultimately it prevents the credit card company from charging any interest to you.
This is because the company will have earned revenue from the swipe fee and furthermore, you have kept with your frequent use of the credit card. The swipe fee is paid by the merchant which is good news for you. Not only will you not be charged any interest but your credit score will not be hurt.