Trying to Boost Your Credit Score? A Credit Card Can HelpMarch 8, 2011 - 8:57 am
Consumers that have sworn off credit cards in pursuit of better credit may instead find it difficult to see a boost in their scores. Applying for a credit card actually is one way to ensure better credit, provided the card is used sensibly and for the good of your score.
Why Credit Cards Matter
A credit score is comprised of many factors. One of which is the type of open and active accounts a consumer maintains. While it may have taken years to satisfy prior credit card debts in full, closing out accounts or leaving them inactive actually can hurt a score.
In order to achieve better credit, a consumer needs to show a nice balance between the types of accounts they have and how they manage those accounts. For instance, if one only has a mortgage company reporting back each month, a credit score will only increase so much over time. However, if a consumer maintains their on-time mortgage payments, has a vehicle loan in good standing, and makes regular use of a credit card and then pays it off in full each month, there will be a much bigger boost in his/her scores. By maintaining different types of accounts and acting responsibly with all of them, it shows other lenders good credit management skills and it factors into a better score.
Getting the Right Card
It is not good enough to just apply for any credit card. If you are planning to use the card as an avenue for raising your credit score, it is important to select the right card for your lifestyle to help ensure it is used responsibly. For some, an existing poor credit score can put limitations on the type of credit card they can get. Those with low scores will often have to apply for a secured card first and make regular deposits into the account in a timely manner. A secured card account that is maintained well often will evolve into the approval for a traditional credit card.
If you have a fair credit score and are approved for an unsecured credit card, the credit limit will likely be low. However, by making on-time payments and not going close to the credit limitations, even a low-limit credit card can better your score. Over time with responsible management, a low limit can evolve into higher limits.
You also need to decide which card is right for you. Are you partial to certain rewards programs or benefits of a certain card company? Do you need to find cards specifically designed to give you cash back? Whatever your personal lifestyle is, you should find a credit card that compliments it. Don’t apply for cards just to see if you can get them. There is no point in having an airline rewards credit card if you don’t travel. Find one instead that gives cash back for getting gas and groceries.
How to Make the Card Work for You
Once you obtain your new credit card, whether it is secured or unsecured, plan along with your budget to make regular, small purchases every month. Set aside the cash value of what you charge on the card to ensure you can make a payment in full each month. Both secured and unsecured cards should also be selected based on their credit reporting criteria. For instance, if you are using a credit card for the sole purpose of getting a better credit score, make sure the card you select reports information to all three of the credit bureaus.
It can be scary to re-enter the credit card world but it is a necessary step for all consumers to maintain better credit scores. Start with a plan and good research for the credit card you need and then follow the steps for using credit wisely to get the most benefit out of your new credit card.