5 Sure-Fire Ways to Build Good Credit with Your Credit Cards

Your credit history and credit rating are critical to both your professional and personal life. Many people believe that a credit score is only important when applying for additional credit or loans. However, in reality, your credit score can determine whether an employer wants to hire you, a landlord wants to rent to you, or even if utility companies are willing to turn the lights on for you.

Therefore, it is imperative that you keep and continue to build a good credit rating. How do you enhance your credit score? Here are five easy ways that are sure to improve and build a solid credit reporting with your credit cards.

Stay below your credit limit

Your credit limit is not a goal. Many consumers feel free to charge up to their credit limit, but end up paying the price on their credit score.

Your credit score rating uses an algorithmic formula that takes into consideration the amount of credit you use. If your account balance is reaching the maximum, your credit score will suffer. A good rule of thumb is to charge only up to 30%, and no more than 50% of your available credit limit. This improves your credit score and shows other potential creditors that you can manage credit effectively.

Charge only what you can afford

Each one of your credit cards has a credit limit that you should never exceed. But more importantly, you should never charge more than you can afford to pay in the first place. Though it may be nice to charge airfare, hotel, and restaurant bills on a credit card for a needed vacation, you may end up paying it off in installments for years. And when you figure interest in the revolving balance, your vacation could more than double the cost.

Use your card only when you do not have the available cash, but can pay the charges you make within a month or two.

Pay on time every month

This is a key factor in creating a good credit history. Your creditors report to the major reporting agencies every month. Even one late payment can lower your credit score and will be on your report for at least 7 years. That’s right – 7 YEARS. Be sure to pay at least the minimum payment due on your credit card account every month before the due date.

Pay in full each month

If at all possible, pay your credit card balance in full each month. Paying in full prevents finance charges from accumulating on your account. But even leaving a small revolving balance, say $10 or $20, can be a positive mark on your credit.

Use only one credit card

Having a few credit card accounts on your credit report is a good thing, but only if they are used wisely. Avoid the temptation to use all the credit cards you own. Try to charge to only one credit card with the lowest interest rate or the best rewards offering, and pay that balance within each month.

Your credit rating is important for your future lifestyle and even your future employment. Be wise and use your credit cards prudently to build a solid credit rating for your future.

Write to Grace Carter at grace@creditdonkey.com