Credit cards are the fastest way to establish or re-establish your credit history. You can use credit cards to demonstrate your financial responsibility and rapidly improve your credit score. Even when you’ve been in financial trouble and had to turn to bankruptcy for debt relief, you can use credit cards to rebuild your credit within just a few months of your discharge.
Credit cards are tools that must be wielded wisely. If you’re coming out of bankruptcy or a financial crisis, you might be hesitant to carry plastic. Credit cards aren’t the problem – abusing them is – and that’s usually caused by other issues such as unemployment, medical problems, divorce or a life event that that lowers income or increases expenses.
Everyone needs a good credit score, and that makes credit cards a necessity. When rebuilding credit, start slowly with one card and build from there, but be sure to bear in mind these eight credit card commandments to resurrect your credit score and keep it healthy.
#1 Never have more on credit cards than you do in the bank
Credit card lines of credits aren’t there for you to use, they are only there to keep your utilization rate low. You should never charge more than you can afford to pay immediately, and your total credit card balances should never exceed your bank balance.
#2 Always pay in full each month
Making only minimum payments is a fool’s game. If you pay off your credit cards in full every month, you won’t pay any interest, and you never run the risk of maxing out cards and getting in over your head. This is a critical step to getting and keeping a high credit score.
#3 Never pay late
One late payment can drop your credit score by up to 100 points, so it’s a big deal to be tardy. You can pay twice a month to ensure you never run late or carry excessive balances. Plus, if you pay late, you will be charged exorbitant fees, and your issuer may raise your interest rate.
#4 Never max out a card
Maxing out a credit card can lower your credit score because it throws off your utilization ratio. Not only that, but maxed out cards can be difficult to repay, you’ll pay high interest, and it can be a slippery slope to more financial problems. Don’t overuse your cards.
#5 Check your credit report often
Protecting your credit report is crucial not only by engaging in positive credit behavior yourself but also by making sure no one else is abusing your credit. Monitoring your credit report often can help you catch errors and stop identity theft.
#6 Review your credit card agreement
We’ve grown too accustomed to agreeing to terms and conditions that we’ve not read. So many things have T&Cs from streaming services to your phone or tablet. But it’s wise to carefully read your credit card T&Cs to know what your card issuer can do if you pay late or go over your limit.
#7 Review your purchase history
Review your credit card statements monthly and watch for fraudulent transactions. Raise an alert immediately if you spot one. Monitoring your statements is the best way to catch a mistake or know if someone has stolen your card info and is making fraudulent charges.
#8 Don’t loan out your credit card
It’s never a good idea to let someone else use your credit card, much less keep it in their wallet. You never know what someone else is going to do with your card or whether they will protect it from fraud. Your finances are your responsibility, and you must be in control always.
Follow these rules to boost your credit score and also check out Credit Score Keys for tips and strategies to rocket your credit score.