When we think about credit cards, it is not a big stretch that we also think of falling into debt and financial difficulties. While yes, this certainly can be the truth -there is also another angle to view things from. This method is instead, using credit cards to help you improve your finances – specifically your credit score.
While many people may be highly skeptical that this feat can actually be achieved – there are many people who use credit cards and other loans to help them get back on track in terms of their credit ratings. In fact, there are many specific actions you can take related to using your credit card, responsibility so that you raise that credit score instead of making it plummet even lower.
With all of the other financial topics that I have discussed in this blog, this is one I think can help many people and for whom many people living their daily lives can relate to. This is especially true, as the economy still recovers from much larger financial implications. With that being said, here are 3 ways that using a credit card can help you improve your credit score.
1) Positive Credit Habits
It is true that some people are just better with financial matters than others. Whether it be their educational or training backgrounds – or maybe that their brains are just more adept at arriving at these details with more clarity and efficiency. Regardless of your level of expertise with managing financial situations, there is always room to expand and adapt these skills.
Taking out a credit card, for example can help you improve your credit score or even initiate a credit score, if you are just starting out or starting over. By continuing to display effective card use you can develop positive credit habits over time. For every transaction you make, this information will be collected and compiled to form a credit score – and through proper usage and management, your credit score can begin to rise.
2) Payment Behaviour
Whether it was missed payments, overlooked overdrafts, or credit charges soaring too close to the total credit card limit, any of these transaction behaviours may have led you towards a poor credit score. Even if your credit card misuse has gone on for some time, this also does not mean that you won’t be able to redeem your credit score by using a credit card more effectively. Sometimes, banks will set your limits a little lower and put certain parameters in place that can help promote more positive payment and credit card activity. Starting out smaller and building up to more demanding payment schedules and credit limits can be done with success, if you adjust your credit card behaviour. By re-shaping your payment habits, you can notice in a short amount of time how your credit score can begun to improve and also how your whole attitude towards credit cards have changed.
3) Reduce your Debt to Credit Ratio
Lastly, using credit cards to help lower your debt to credit ratio can also be achieved through responsible financial management. When you have a higher debt to credit ratio, this basically means you owe much more than you have and you have used up much of your total credit limit. Many of us are likely to be quite guilty of this at one time or another, however we all should at this stage in the game be trying to lower these limits. In turn, this process can be done by using your credit card for only the purchases you require and also by paying off your balances on time, every time – not to mention paying off the credit card in full each month, if you can. Again these credit card behaviours will help to improve your credit score and can even improve your spending habits over time.
Overall, having a credit score that is at a good level will help you out greatly when you have to access future loans, for example a car loan or a mortgage. There will be large purchases in our lifetime, many of them inevitable – and therefore we need to have a strong credit standing to be able to secure the necessary financing. Ultimately, the message here is – it is possible to use your credit card for good instead of evil and these strategies can help improve your financial well-being as well as giving you more freedom to fulfill many of your lifelong goals.