Building Credit With a Credit Card: Tips for Establishing and Improving Your Credit Score

Your credit score shows people how effective your financial management is and establishes your creditworthiness. If you have a good credit score, you can get loans quickly, sometimes even at lower interest rates. Besides, you can access premium credit cards with a higher credit score and apply for higher tenure loans as well.

Now one of the easiest ways of building your credit score is by using your credit card smartly. And here’s all you need to know about it.

How to Increase Credit Score with a Credit Card?

• Pay Bills on Time

The biggest factor that decides your credit score is your payment history. Defaults or delays in payments can lower your credit score. So, plan your credit card usage and other finances so you can manage the bill payment on time every month.

Paying the entire bill before the due date is ideal, but if that’s not possible, at least pay the minimum amount due. In this case, while you may be levied some interest for the outstanding amount due, your credit score will not be affected.

• Maintain a Low Credit Utilization Ratio

The credit utilization ratio tells you how much of your available credit you’re using. You can find this figure by dividing the credit amount by your total credit limit. Credit scoring companies calculate individual ratios for each of your credit cards and also for a consolidation of all your cards.

While less than 10% is the ideal ratio, anything below 30% will get you a good score. You can do this by paying down your card balance or increasing your maximum credit limit.

• Keep Older Cards Active

Your credit score improves when you have a long history of being financially responsible.

But when you close out your older cards, the credit history associated with it gets deleted. This reduces the credit score. Your total credit limit also comes down, increasing your credit ratio. So, as long as minimal or no annual fees are charged, it’s best to keep your older cards active.

• Space Out New Card Applications

Your card provider checks your credit report to determine your creditworthiness each time you apply for a new credit card. Unfortunately, this is a hard inquiry, and it lowers your credit score.

So make sure there is a gap of 6 months or more between new cards or card upgrades. This can ensure that your credit score recovers nicely before the next fall.

Conclusion

Credit cards have become an integral part of today’s financial planning. They can, indeed, make payments easier. However, when used correctly, they can also assist you in improving your credit score.

The good news is that getting a credit card online is also easy. You only need to choose a card provider and apply on their website. Then once you get your card and pay your bills on time, over time, your credit score will automatically rise. Besides, thanks to a good credit score, you’ll get additional perks like benefits from card usage, lower interest rates for loans, etc.

So choose your credit cards wisely and use them regularly and prudently to enjoy a high credit score. Apply for a Credit Card today.

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