Using credit cards to build good credit

Using credit cards to build good credit

Using credit cards to build good credit

Credit is a very important factor in the world these days, and knowing you have good credit is a form of security that not everyone has. If you handle it responsibly, credit can be a very powerful tool to help you get the things you want.

Don't charge more on your card than you can comfortably afford to pay later. Ideally, you want to charge regular monthly expenses that you'd pay in cash anyway, then pay off the credit card balance. If you want to carry a small balance each month, that's fine, too; just remember that you'll be incurring interest every time you do. Regular use of the credit card, along with regular on-time payments, shows the credit card company that you're responsible. As time goes on, you'll find it easier to apply for more credit cards and also, you'll get credit card offers with better interest rates.

You also want to always be aware of your total balance vs. the full credit line available to you. Credit companies look at someone who continually uses almost all of their available credit as a higher risk. If you consistently carry a large balance, not only will you have to keep paying interest, but you'll never really pay the bill off. That's not responsible credit use, and should be avoided. Aim for only using a third to half of your total available credit. Use your credit card regularly.

When first shopping for the best credit card, it's probably tempting to sign up for as many as they'll give you -- but please wait. It's best (in the eyes of the credit card companies) to start with just one account, and slowly (over time) build your credit card portfolio rather than amassing all the available cards at once.

If you do decide to carry a small balance, it's always a good idea to pay more than the minimum payment. Generally, the minimum payment pays the interest and a tiny bit of the charged items; paying more than this will help you get the balance paid down quicker, and looks more responsible than simply paying the minimum due each month.

Proving to credit card companies and banks that you are good borrower will definitely convince them to give you a higher credit limit. A higher credit card limit means greater purchasing power but it also increases the risk of getting yourself in debt beyond your ability to pay.

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