Raising Your Credit Score Using Your Credit Card
The trend towards cashless transactions continues to increase over the years. More and more establishments avoid cash transactions, as this makes accounting more convenient and is generally safer than handling cash. Besides, online purchases are increasing as well, making it an absolute necessity for people always to have a credit card ready at all times.
Having a credit card, though, can be tricky financially, as improper use could damage your credit score significantly. And since credit score directly affects your insurance premium, subscription plans, apartment applications, and virtually all types of loan applications, having a good credit score is paramount.
Fortunately, using your credit card as a tool to raise your credit score is possible. Read on to find out more about credit card settlement.
- Use your credit card wisely for a good credit utilization ratio.
Your credit card balance has a direct impact on your credit utilization ratio. It is the ratio of your total card spending to your total credit limit.
However, increasing your credit limit by applying for multiple cards is not a good idea. Every time you apply for a new card, creditors look into your credit report, making a hard inquiry.
Each hard inquiry stays in your credit report for two years, and creditors may interpret too many hard questions in a short period as an inability to pay off bills or poor handling of finances.
Use your credit card for frequent but small transactions so as not to accumulate a debt that you cannot pay off on time. One example is using it to pay monthly subscriptions, rent, and utility bills.
Monitor your credit card transactions to avoid overspending. You can do this online or download mobile apps to help you do this.
A good target is limiting your credit card use to 30% or lower, which lenders view as a healthy credit utilization ratio.
- Avoid too much credit card debt.
Practice self-discipline even as you are only beginning to use credit cards. View it as a tool to increase your credit score and only as a safety precaution for emergency expenses down the road.
Avoid making purchases that you do not have the cash to pay for in the first place. Having a credit card is not an excuse to buy elegant but expensive and, more importantly, unnecessary items.
- Settle huge credit card debts
Certain situations make huge credit card expenses unavoidable, compromising your credit score significantly and putting more strain on your ability to pay the debt off.
When the bills have piled up much faster than you can pay them off, it may be time to negotiate for a credit card settlement. Sudden loss of employment, emergency medical expenses, and unscheduled home repairs due to natural disasters are some of the reasons that can make you eligible for credit card settlement. You can talk directly to the creditors, but hiring a credit settlement company gives you a higher chance of success. They have the knowledge and experience to secure the best deal possible and get you out of debt.
The credit card can be your credit score's friend or foe. Which one it ends up depends significantly on your ability to use it wisely. Building a healthy habit towards spending puts you in the best position to manage your expenses and total financial freedom.