How to Use a Credit Card to Rebuild Your Credit


Does my credit score really matter? What is the importance of this number? It is important to understand that the backbone of your financial health is your credit score. If you have no credit, or bad credit, you’ll likely find yourself spending more money on various life essentials. Therefore, striving to continuously improve your credit, or rebuild your credit from past-issues, needs to be a priority within your life. While there are literally hundreds of different ways you can help rebuild your credit score, perhaps one of the most effective ways to correct a poor credit score is by smartly using a credit card.

How Credit Cards Enhance Your Overall Credit Score

Credit ReportCredit cards can do one of two things – they can boost your overall score or they can severely lower your score. The outcome is solely dependent on how you use them. Therefore, increasing your credit score can only happen if you continuously use your credit card wisely.

The first step in boosting your credit score with a credit card is to keep your oldest card active. Even if you’re not using this card anymore, the history of the card will help boost your overall score. However, when it comes to rebuilding your credit, you should use all of your credit cards sparingly. Charge a small amount every month and continually make regular payments. Remember, you should always keep your utilization ratio between 20 and 30 percent.

As a general rule of thumb, never charge more than 50 percent of the overall credit limit. For example, if you have a $1,000 line of credit, never use more than $500 of this credit. However, to truly boost your score, you should keep this closer to 20 to 30 percent – or $200 to $300 if you have $1,000 credit limit.

Another excellent tip is to pay off your credit cards in full. This keeps your utilization ratio low and saves you money by avoiding interest charges. While some experts suggest keeping a small balance on your credit cards, many more personal finance authorities suggest when it comes to rebuilding your credit, you should regularly pay off your debt each month.

This leads into the next tip, which is also the most important – never miss a payment. Payment history is one of the most influential elements within your credit report. Therefore, in order to keep your credit score on the rise, you should always strive to make at least the minimum payments on all of your credit cards. Failure to make even one payment on time can severely damage your credit score, which can take a significant amount of time to recover.



How Many Credit Cards Do You Need for Solid Credit?

Credit Cards Do You Need for Solid Credit

If you’ve ever experienced the horror of credit card debt, then the answer to this question is likely “no credit cards!” However, for those who haven’t had to deal with such paralyzingly intense financial burdens may be confused about this question. The truth of the matter is credit cards can help you reach your ideal credit score; however, you must learn how to use them correctly. While there are literally thousands of tips when it comes to responsibly using credit cards, this article will primarily focus on the number of credit cards you should have to build and sustain a solid credit score.

According to the latest surveys, roughly 72 percent of American consumers utilize at least one credit card. Moreover, the study found those who use some sort of payment card, such as a debit or credit card, have nearly four individual cards. Seeing this, it’s easy to suggest that in order to sustain a healthy credit score you should have multiple credit cards. However, the true answer isn’t as cut-and-dry.

Multiple Credit Cards – Its Effects on Your Credit Score

credit-scoreThe primary concern about having multiple credit cards revolves around its impact on your overall credit score. When you have more than one credit card, you can actually boost your credit score as it’s far easier to keep your overall credit utilization ratio relatively low. For example, if you have a single credit card with a $1,000 credit limit, you should only carry a balance between $200 and $300 to retain the ideal utilization rate. More examples of managing credit cards can be found here. However, if you have multiple lines of credit totaling $10,000 you can charge up to $2,000 – $3,000. While this may not be the best choice for you, it’s easy to see that the more lines of revolving credit you have, the easier it will be to remain under the suggested limits.

In the quest of retaining the ideal credit score, the more lines of credit you have, the easier it will be to keep your utilization ratio low. However, the leading credit reporting agencies don’t recommend opening credit card accounts with the sole goal of increasing your overall lines of credit. In fact, says that if you have too much credit at your disposal you can actually lower your credit score.

Another primary benefit of opening multiple credit cards is obtaining a variety of benefits. The majority of credit cards come with rewards based upon your card usage. For example, some credit cards offer a 5% cash-back reward when you use your card at specific retailers, such as at grocery stores, hotels and even at gas stations. By utilizing these unique benefits, you can actually make money by using your cards on everyday purchases. However, it’s imperative that you remember to keep your utilization ratio below 30 percent and actively working to pay off your balance each month to save you on interest payments.