How to Improve Your Credit Score With a Credit Card

iQuanti: Whether you have a poor credit history, are applying for your first credit card, or simply want to boost your credit score, finding the right credit card and knowing how to use it can be a huge help. 

Here are the best ways to improve your credit score with a credit card.

Credit building cards

There are a number of cards created specifically for building credit, known as credit building credit cards. A credit builder card, when used carefully, can improve your credit score. You can notice an improved credit score by making timely repayments and staying within your credit limit.

Paying back the borrowed amount on time increases your creditworthiness with banks and providers, even if you've had debt problems in the past. Credit builder cards help borrowers prove they can pay back what they borrow, resulting in a better credit score next time your finances are investigated.

Credit utilisation

Your credit utilisation rate or ratio is defined as the amount of credit debt you currently have divided by the total credit limit you are accepted for. In other words, it's how much you currently owe divided by your credit limit and is generally expressed in terms of percentage.

If your credit utilisation rate is low, it means you are using less of your available credit limit and not exhausting it completely to manage credit. This in turn can have a positive impact on your credit scores.

Paying your balance off in full and on time

Your statement will outline your minimum payment amount required, as well as the grace period in which you have to pay it off. However, to avoid interest payments and get into a healthy credit building habit, pay it off in full and straight away.

If it isn't already, then align your repayment dates with your incomings to avoid cash flow issues - most card issuers will happily oblige. 

Summary

The most important thing when it comes to any credit card is to get into a good financial habit. Using it sensibly for regular and small payments is the best way to get used to it and avoid problems. 

After a while, you prove that you can borrow money and pay it back, thereby improving your credit score.

Source: iQuanti, Inc.

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Categories: Personal and Family Finances

Tags: credit cards, credit score, financial services, personal finance