How to Build Credit with Credit Card?

How to Build Credit with Credit Card

Do you use a Credit Card? Do you use the card wisely? Is your credit score excellent, good or worse. Follow some websites to check your credit score online for free.

Do you know, your Credit Card usage will either build up or damage your credit score? Bad or poor credit score will damage your financial health, and you will not qualify to avail loan.

The credit history defines the past behavior of the borrower and the finance companies analyze the past behavior and determine the eligibility of the loan applicant.

The ways of using a Credit Card directly influence the credit score. You need to follow a few essential tips to build credit with Credit Card.

You can build good credit without a Credit Card. But, there are several other benefits of using a Credit Card rather than just building the credit score.

If you already have a Credit Card and don’t use it, you are at the risk of damaging your credit score.

Tips to Build Credit with Credit Card

First of all, you need to select the right Credit Card after monitoring your daily requirements, lifestyle, habits and income source.

Once you meet the requirements and obtain your first Credit Card, use it responsibly following the guidelines to build credit with Credit Card.

1. Use the Credit Card as a Debit Card

Do you use a Debit Card to purchase things or for making payments? You can use the Credit Card for purchasing things or making payments.

But, make sure to keep a track record of the card usage or the transaction amount. You won’t get transaction update of Credit Card usage, unlike the Debit Card.

You need to use the Credit Card carefully and treat it like a Debit Card to avoid over-limit spending. Exceeding the credit limit, you will end up paying higher interest rates on the borrowed amount, and this will impact badly on the credit score.

2. Keep the Credit Amount Low

Make sure to keep the credit amount low. Never exceed or use the available credit limit of the card as it will drop the credit score.

The amount you owe impacts on 30% of the credit score. If you utilize the maximum of the credit limit, you may miss the repayments in time.

Defaults in payment will degrade the credit score. To give a significant boost to your credit score, you need to keep the credit limit low. Give your best efforts to keep it within 30% or lower.

3. Make the payments on time and make the full payment without any debt

If you don’t want to end up paying higher interest rates, you must make the payments of the Credit Card within the grace period which is interest-free! Make sure to repay the maximum of the borrowed amount.

If you fail to make the payments, the credit score will degrade. And, if you don’t make the full payment, you will have to pay the applicable interest rates and also the credit score will degrade. The payment history builds up to 35% of the credit score.

4. Cut off the Number of Credit Cards

How many Credit Cards do you use? Several types of cards are available with specific rewards and benefits as per individual needs.

But, that doesn’t mean, you will avail all types of cards to fulfill different purposes! Using too many Credit Cards reflects a bad credit score.

Use a low-interest rate Credit Card with a small credit limit and no annual fees if you want to build credit score with the Credit Card. Compare different Credit Cards and select as instructed. The bonus rewards and offers can be additional!

5. Don’t get tempted towards the free offers available with the Credit Card Applications

The Credit Card issuing companies tempt the individuals searching for the best Credit Card by offering gifts and free offers.

Don’t get tempted towards such advertisements. Certain people think to apply for the Credit Card and avail the gifts and free offers and cancel the cards later.

It is not that simple to avail and cancels a Credit Card! Every time a person avails a Credit Card counts on the credit score and the credit report shows the cancellation. It is better not to apply for the card than availing and canceling!

6. Keep the Accounts Active

The Credit Card users with a long history of card usage have a good impact on lenders. Such cardholders continue using the cards responsibly.

The length of the credit history scales 15% of the credit score. Don’t create a new Credit Card account and close the old one frequently as it affects the average age of the account and degrades the credit score.

You must find the card that perfectly meets your lifestyle and requirements. Shuffling from one card to another is, of course, a bad idea, if you aim to build credit with Credit Cards.

Additional Guidelines

Before applying for a Credit Card, you must be financially ready to handle the Credit Card. You have to stick to the monthly budget and make perfect plans to make the full payment of the Credit Card every month.

The Credit Cards are not bad, but it will get burdened if not used responsibly. You must focus on to select the right Credit Card and use it responsibly making on-time payments.

If you have a bad credit score, you must select the Credit Card designed for people having a bad credit history.

Don’t get tempted towards the reward points and other benefits available other cards for people with good credit history.

You can work out for qualifying for better offers selecting the card for people with bad or fair credit. If your application for Credit Card gets rejected, don’t apply in short intervals as it will hurt the credit score.

Conclusion

Handling the Credit Card responsibly, you can build a good credit score. Follow the best guidelines to build credit with Credit Cards.

If you don’t have financial stability, stay prevented from using a Credit Card. Take the right decision. Focus on to build good credit score if you have plans to avail a loan.