If you are faced with a credit score that isn’t too appealing, I would be showing you four easy methods to increase your credit score using your credit card.
I know this statement may sound pretty confusing to you, especially if your past credit card usage got you into this current ‘credit score’ mess. Well, whichever way it happened, I guess you can breathe a sigh of relief, knowing that there are a couple of things that you could do with your current credit card/cards that could positively impact your credit score.
And by the way, this method of increasing your credit score does not require having to pay some huge bucks to any credit repair company. This I believe should get you excited!
So let’s get started
What is a Credit Score?
A credit score refers to a set of unique numbers that financial institutions use in determining how credit-worthy an individual is.
What do I mean by this?
When it comes to giving out loans to individuals, banks, credit card companies, and other lending institutions use a person’s credit score to judge how much that individual could possibly borrow and repay based on his past credit history. Your credit score would also be used to decide on the interest rate that would be applied to a loan.
A credit score is therefore one of those vital financial metrics which should be nurtured properly through one’s financial journey. Do you know why? Because its impact- both positive and negative could be really huge.
How huge you may want to ask?
Well, for starters, it may influence if you ever get a loan approved.
Your credit score could also influence the interest rates you get if and when you get a loan approved. And to cap it, your credit score would determine your credit limit and how many credit cards you could possibly get to own.
That’s huge, right? I told you!
You could use this credit score calculator to check your credit score
How To Increase Credit Score With Credit Card
You may not be aware, but most good habits that pertain to how you treat credit and use your credit card have a far-reaching effect on your credit score. Habits such as ensuring that you do not exceed your credit card spending limit, and clearing your credit card bill all have a positive impact on your credit score.
Let us however examine these habits and many others in the lines below
1. Pay Your Credit Card Bill on Time
This can almost not be overemphasized considering how much effect late payment or not paying off your credit has on your credit score.
As a matter of fact, 35% of your FICO score is hinged on your credit card payment history. That’s how important paying up and paying early is.
There are however instances when you aren’t able to make a complete payment by the end of the month. For situations such as this, what is recommended is that you endeavor to at least pay up the minimum due amount.
While this may not stop interest charges from accruing, it would at least prevent your contact details from being submitted to the credit bureaus.
2. Mind Your Credit Utilization Ratio
The credit utilization ratio is basically a measurement of how much of your credit card limit you are making use of.
Yeah! Even though the credit card limit is $1,000, you should know that your utilization should ideally be capped at 30%. And some would even say 7% utilization is just perfect.
This is what I mean: Let’s say you have a credit card with a limit of $1,000. Having a bill of $700 on that card would mean that you have utilized 70% of your limit.
Okay, I guess you are wondering why that is wrong since you haven’t maxxed out your limit.
Well, the higher you go on your utilization ratio, the more your credit card issuers consider you to be at risk of repaying your credit.
So, you want to get your credit score to be on the rise, learn to keep tabs on your utilization ratio.
3. See Your Credit Card as a Tool
I guess no one ever told you this, but apart from using your credit card to raise your credit score, your credit card can also earn you perks such as cash backs and even Credit card points for travel. But really, this depends on how and what you do with your credit card.
So how do I use my credit card as a tool?
Okay, guess the large chunk of credit card holders use and see their cards as a means to ‘borrow’ huge money whenever they need it. But what many fail to realize is that when and if they aren’t able to repay, the interest rates on credit cards are about the highest when compared to other loans.
What you, therefore, want to do is to use your credit card as often as you can, but this time to make payments for those ‘petty’ bills. I mean bills like gas, electricity, and water. These bills are usually little, and you can pay them up by the end of the month.
At the end of the day, it’s a win-win situation for you.
You used your credit card a couple of times during the month, you got those perks, you were able to completely pay up your balance, your credit utilization was low, and to cap it, your credit score gets a thumbs up.
What do you think about this?
3. Use Your Card Regularly
I already touched on this in the point above, but I think it’s a really crucial point that needs some more lines of words.
The truth is that credit card issuers love to see you use their cards regularly. But this is where you need to apply some extra wisdom. So what do you do?
You use your credit card as often as possible but never get to use it on mega purchases which may be impossible to pay up for by the end of the month. So you want to charge only the basics on your card. Like your monthly streaming payments, internet subscription, and other basic payments.
Be Patient With Your Credit Score
This may sound rather unnecessary, but considering how impatient we could tend to be sometimes, it is important that I remind you of this.
Remember that it took a course of time for your credit score to plunge to where it is right now. So, you should be ready to put in the much-needed work to see it rise; and while doing this, do not expect some overnight magic.
You also do not want to fall prey to credit repair services that promise overnight results. Things don’t work that way when it comes to raising your credit score.
I really hope this was helpful, and I look forward to everything working out well for you and your finances