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Using Your Credit Card to Raise Your Credit Score

Using Your Credit Card to Raise Your Credit Score

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Advance Personal Finance

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There are a number of complex factors that go into determining your credit score. However, one of the simplest, easiest and quickest methods to raise your credit score is to use your credit cards in a responsible and regular way. Whether you currently have bad credit or good credit, the smart use of your credit cards will ensure that you have a large positive score on your credit history.

Pay Your Bills On Time Every Time

The basis of a good credit score is a solid record of making your payments on time. Never having had to make regular and timely payments does not mean that you have a good credit score, it means that you have no credit score. It takes strong money management skills to consistently pay off your balance every single month, and that is what a high credit score shows. Your payment history makes up 35% of your FICO score, so this is the most important part of raising your credit score with your credit card.

Use Your Credit Card Like a Debit Card

One of the most common pitfalls for credit card owners is losing track of their spending. Unlike a debit card, a credit card will allow you to buy more than you can afford on your current savings, up to a limit that is usually far more than your monthly income. It is very important to maintain a tight budget so that you do not accidentally overspend. Try to treat your credit cards as if they were debit cards, and spend only the amount that you are sure you can pay off by the end of that billing period.

Maintain a Low Balance

The amount that you owe is the second most important factor in determining your FICO score, at 30% of your overall score. Credit bureaus also examine how that debt is spread between different types of lenders. Needless to say, more credit card debt relative to, say, mortgage debt will mean a lower overall score. The more indebted you are and the higher the rates of interest on that debt, the less likely you are to be able to make regular payments on existing or future debt. Therefore, keeping your credit card debt low can have a big boost on your credit score in two ways. Try to pay off your credit card before the monthly statement arrives, as this amount is what will be recorded, even if you pay it off right away.

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