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Articles & Features
The Fair Credit Reporting Act: What You Need to Know
What Do I Do If My Credit Is Stolen?
Teaching Kids About Credit Card Responsibility
Understanding Credit Card Ratings
Cell Phone=Credit Card?
Damaged Credit?
Fund your business with Credit Cards
Rewards Cards: Reap the Benefits
Credit Tips for the Holiday season
How Promotions work: Direct mail, TV Offers, and the Internet
Student Credit Cards
Finding the Right Card: Factors to Compare

How Getting a Credit Card Affects Your Credit Rating


Everyone knows that credit ratings are the most commonly used financial indicators of a person’s spending habits. Most people want to improve their credit scoring, but few know how. This is namely due to the fact that credit ratings are finicky things. It can be difficult to understand what makes them go either up or down. But on top of being seemingly unpredictable, they are also very important and they can be the deciding factor when you’re buying a home, applying for a loan, or financing a larger purchase, such as a car.

While some of the factors that determine your credit standing are pretty straightforward, it’s smart to educate yourself on how credit ratings operate and put a little work into improving your score. Credit cards can play a major role in your credit score, and if you know how to use your credit card well, it can help you get the credit rating boost you need.

Most importantly, you need to know how to use your credit card to actually add positive credit to your credit report. By keeping your account active – making purchases and paying the bills on time – credit companies understand you as a responsible consumer, who can manage spending and has good credit habits. A smart way to start developing these credit habits is by using your cards to make automatic payments on regular life expenditures.

If you put bills like utilities on your credit card, and you’re sure to pay them off consistently, you’re credit habits quickly impact your credit score for the positive. Even if you don’t use your card on a regular basis, and aren’t comfortable with altering your spending habits, make sure to put a few little things on your card each month and pay them off dependably. Credit card companies report this behavior as positive, and it can save you money on future loans or financing.

Credit card debt doesn’t always negatively affect your credit score. As long as you are actually managing your debt, and consistently paying off reasonable amounts, your debt can actually help you built credit. When using your debt to create good credit ratings, don’t hover too close to your actual credit limit, as that will negatively impact your credit standing. Instead, try to maintain a balance that utilizes around a quarter of your credit limit.

If you do have debt, and are trying to regain control, your credit score will eventually reflect this effort. By taking advantage of debt reducing options, such as balance transfer cards and cards with consolidation features, you can quickly show a turn around of your spending habits. Look into cards that will allow you to reduce your debt quickly, such as those with low APRs, and you can start raising your credit score.

To maximize your credit improvement strategy, make sure that your monthly payments always exceed the minimum amount your card requires. Even if you pay just slightly more than the lowest amount, your payments will indicate that you are a consumer who can manage your financial situation.

Although it may seem strange, if you have a large amount of unused credit on your current credit cards, you shouldn’t cancel them. Lots of credit reporting agencies compare how much debt you have against the total amount of your available debt. The larger the divide, the better. Having at least two or three sources of active credit shows lenders that you can be responsible and won’t take advantage of your possible spending limits.

As any financial consultant will affirm, credit cards can be one of the best ways to improve your credit scoring. By reflecting good spending habits and managing your debt with care and strategy, you can use your cards to boost your credit score.

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