How to use a credit card to improve your credit score

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The world of credit cards is one that either excites or terrifies people. Some may think of credit cards as a ticket to getting ‘free money’, which they’ll worry about sorting later once they’ve maxed it out on a shopping spree or three. Others will steer well clear of credit cards, having been taught they’re a sure-fire way to get stuck in a spiralling debt problem.

By Imogen Groome | 15th January 2019
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The reality, however, is in between the two. Credit cards shouldn’t be misused by any means, so should be used with the caution required by any responsible person, but they can also provide an incredibly useful way to keep your spending options flexible – and improve your credit score, to boot.

So how exactly can credit cards improve your credit score? Read on to find out.

Pick the right credit card

It’s important to pick a card that will suit your lifestyle. Avoid being drawn in by sign up bonuses or other flashy deals, and go for something that will suit you over the long term. Do some research into key terms such as Annual Percentage Rate (APR), introductory interest rates, loyalty points and cash back options, before making your decision.

Don’t make multiple applications

Only make an application if you’re confident you’ll be approved. Making repeated applications and having the issuer check your credit each time will result in points getting knocked off your score. Panicking due to a rejection and making multiple applications in a short space of time could indicate you’re in financial trouble, so if you get rejected, leave it for a while and consider other ways to improve your score before trying again.

Use under 30% of your credit limit

It’s generally a good idea to never spend beyond your limit, but this is even more applicable when it comes to credit card spending. Regularly using over 30% of your limit could do damage to your score, so stick to a healthy 1-10% utilization, as this will make the best impression for lenders. It’s also a good tactic to keep yourself safe, because if any emergencies come up, it’s good to know you have a back-up option. But if you haven’t made such emergency preparations and end up maxing out your card as a result, this could come back to haunt you – even if you pay back your balances on time following this.

Concept of The man is stressed with debt owed by using credit card
It’s important to use your credit card responsibly (Picture: iStock by Getty)
Set up automatic monthly bill payments

If you miss a payment, you are shooting yourself in the foot when it comes to improving your credit score. Making at least the minimum payment before or on the due date is essential if you want to get future credit approved, not to mention getting credit limits increased.

Pay your full balance by the due date to save on interest

It’s fine to just pay the minimum required each month, as this will keep your account in good standing, but paying the full balance will save on interest costs. Furthermore, it proves you have the finances to make larger repayments when required. Only paying the bare minimum indicates to lenders that you’re stretched financially, and couldn’t really handle or afford borrowing the credit in the first place.

Monitor your credit score regularly

Keeping an eye on where your credit score is at will stand you in good stead for the future. Even though it’s not a number that regularly shows up in day to day life, it’s still important to keep an eye on it and perform basic maintenance – not wait until you need to be approved for credit. Financial health maintenance is important, as you could see some errors on your report that need addressing, or it may come to your attention that you need to take some steps towards improving it. More importantly, knowing what your credit score is will mean you won’t be surprised at a negative credit application result – which will in turn damage your credit score even more. Providers such as Experian, Identity Guard, MyFICO, Identity Force and AnnualCreditReport all offer comprehensive credit report checking services for your convenience.

Young man shopping with credit card and laptop computer
Keep track of your credit score by checking out reports regularly (Picture: iStock by Getty)
Stick to a budget

Credit cards can be useful as a way of having more flexibility in between paychecks, and the added bonus is that showing you can borrow money responsibly will lead to an increase in the amount you’re allowed access to. A good way to view your credit card is as a second debit card – not as a free money card. Having the means to pay back your credit card is much better – not just for your credit score, but your stress levels – than carrying around a high balance and soaring interest rates.

Keep your account open for a long time

Good credit spending habits make you look more responsible to lenders, and repeating those habits over a long period will make you look reliable, too. Some may be drawn in by the appeal of sign-up bonuses, and open credit accounts regularly, but this can do damage to your credit score. It’s better to have one simple account open for a long time than flit between lots of different flashy accounts and wonder why your credit limit never gets increased.

Written by
Imogen Groome
Imogen is editor-in-chief of Hot5. She is also a lifestyle blogger, author and freelance journalist, with particular interests in music, politics, psychic readings and dating. She is usually found at home with her collection of animals, drinking iced tea. Read more.
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