pro finance blog
Menu
  • About Me
  • Hire Me
  • Contact Me
  • Submit a Guest Post
    • Privacy Policy
    • Disclaimer
Menu
credit score

6 Ways You Can Use Your Credit Card to Improve Your Credit Score

Posted on February 1, 2016May 11, 2021 by Tina Roth

Your credit card is one of the factors that decide your credit score. Have any idea how important the card is? Probably not. But I hope you’ll get the idea once you are done reading this article.

To start with, paying off the outstanding balance on your card in time is not enough. There are few other things that you need to keep in mind when you use your card. Only then, you can increase the score, and keep it that way.

credit score

The list begins with……….

Charging less

Are you one of those, who are impulse buyers, get carried away seeing flashy apparels or cool gadgets, like a new lawn mower – for that be sure to visit lawnmowery – and charge almost near to the credit limit to buy it?

Many cardholders think it’s okay to charge near the card’s upper limit. They think they’ll pay the whole balance after receiving the balance statement. Case closed. But when the card issuer supplies account information to credit reporting agencies, the date of the account balance is the date, when the last statement was issued.

The report doesn’t show that you’ve paid the debt. As the credit report shows the outstanding account balance, your credit score bears the brunt. Hence, if you want to raise your score quickly, don’t ever charge near the credit limit. Always charge less.

Credit utilization rate

Not everyone knows this hack. The ones who do, have an easy time raising their credit score. The credit utilization rate is taken in stride by FICO when it gives you a credit score. To find the rate, divide the total credit card balance by the total card limit.

A low credit utilization rate is good for your score. Lenders prefer a low utilization rate over a high rate. Keeping the rate below 30% of your credit limit is safe, but below 20% is recommended. Lenders want to see that you are responsible indeed, and know how to use the card. A low utilization rate informs them you are.

Credit limit and account

What follows from the above discussion is you should keep your credit limit high, and don’t close the account. Let me explain why. First, if your credit limit is low, then your charge could reach the limit quickly. Keeping the limit high means you can use the card to pay for small items, knowing it won’t go near the limit.

When you close a credit card account, the credit limit on the card automatically gets excluded from the utilization calculation parameters. People often close their credit card accounts because of nagging annual fees and interest rate. A high credit limit means higher interest rates. These are troublesome, but you have to endure these so you credit score increases.

Moderate use

Don’t use your card too often. How much are you recommended to use? Okay, if your credit limit is X, don’t use more than 10% of X, which means if your credit limit is $5000, don’t spend more than $500.

Check your billing statement every month, and compare your account balance with the credit limit using the formula stated above. In case you are paying only the minimum amount, start paying in the full. And don’t use your credit card unless it is absolutely necessary.

Issuer’s reporting time

Credit bureaus receive reports from card issuers once every month. The timing is very important because if the issuer sends the report when the bill is due, it’d negatively affect your credit score.

The solution to the problem is easy. Pick up the phone and give a call to your issuer. When the CEE responds, ask him/her at what time they are going to report to the credit bureaus. You’ll know the date, and pay off the entire balance, if not in full, then as much as you could, before that date.

Make some healthy habits

Pay the outstanding balance on your card in the middle of a month. It’s the time when no card issuer reports to the bureau. They send the report at the end. Paying down the balance in the middle of a month saves you from worrying, and your call cost too.

If you are a forgetful person, then setting up an balance reminder is a must for you. It’s easy, sign up for balance alerts, a facility that almost all issuers provide. Make sure that you receive the alert when your balance reaches 30% of your credit limit.

What do you think of the tips discussed above? Would you use your credit card to increase your credit score? Let us know your all plans in the comment section below.

Category: Credit Cards

2 thoughts on “6 Ways You Can Use Your Credit Card to Improve Your Credit Score”

  1. Shanki says:
    February 5, 2016 at 3:01 am

    Hi Tina,

    Thanks for sharing this.
    Very informative. Though I stay I india, the fundamentals remains the same.
    I recently had my credit score evaluated by the CIBIL and found the score to be good.

    I know how to make it better.

    Many Thanks
    Shanki

    Log in to Reply
  2. Young Finance Guy says:
    March 10, 2017 at 8:23 am

    This is great advice to help maintain a healthy credit score. US consumer credit card debt is through the roof. It is so important that we utilize smart credit card habits and healthy debt management overall.

    Log in to Reply

Leave a Reply Cancel reply

You must be logged in to post a comment.

About Me

finance blogger

The idea of starting a blog has been hitting me for long; I took it seriously after falling into a spiral of debt and recovering from it.

I have been anxious all through the financial difficulties. I see that same anxiety in the eyes of people, whose ill fate has put them at odd with financial repose.

It makes me compassionate. Out of this compassion and goodwill, I started this blog. I wanted to help all those, who are facing financial distress..




  • Stock Market
    Understanding the Gov Tech MarketFebruary 16, 2023
  • Phuket Real Estate
    Why You Should Invest in Phuket Real EstateJanuary 24, 2023
  • Corporate Governance
    Corporate Governance: What Are the 3 Core Principles of Good Corporate Governance?December 17, 2022
  • Successful Retirement
    How To Plan For Successful Retirement At 50: 5 Steps To Get Started OnNovember 4, 2022
  • Online Money Transfer
    Do You Still Transfer Money Internationally With Your Bank? There Are Better Online Solutions For ThatOctober 14, 2022
  • finance
    Important Roles of the Minister of FinanceSeptember 16, 2022
  • Avoid for New Businesses
    5 Forecasting Faux Pas to Avoid for New BusinessesSeptember 16, 2022
  • Affecting Pensions
    How Inflation Is Affecting PensionsSeptember 2, 2022

    ProFinance Blog is dedicated to help people who are struggling with their personal finances. We have learned the lessons first hand and know how real the struggle is. Being compassionate about the personal finances and blogging about is our way to help people know more about different situations and how effectively they can handle it. So take control of your finances now and take actions towards gaining financial freedom and security. Join us in the mission to self-educate, learn and help others by sharing valuable information on finances. Here you will find information, tools and techniques on various aspects of finances and learn how you can use the information and implement it to make your financial life better than ever.Join us in our mission to financial freedom.

    • Stock Market
      Understanding the Gov Tech Market
    • Phuket Real Estate
      Why You Should Invest in Phuket Real Estate
    • Corporate Governance
      Corporate Governance: What Are the 3 Core Principles of Good Corporate Governance?
    © 2023 ProFinance Blog | Powered by Minimalist Blog WordPress Theme