Learning how to use a credit card to increase credit score is something that should be taught in high school. Unfortunately, financial literacy is not a national requirement in education.
As a result, many students show up to college and go immediately into high-interest credit card debt. But these little pieces of plastic are not the evil that some would have you believe. In this article, we look at how you can use them to build a credit history worth bragging about.
Two ways exist for you to become an authorized credit card user. The first is gaining access to the use of a parent or guardian’s credit card. In this case, you’re actually listed as an authorized user on the account, so whatever you use affects your credit score.
The second way is to open an account of your own. If you do, seek as low of a credit limit as possible. Excessive limits can get you into trouble because they create the illusion that you “have the money” when you don’t.
Set Up A Recurring Bill Through Your Credit Card
Another method of how to use a credit card to boost your credit score is to set the card up to pay a bill you would have to pay anyway. For example, you have a car payment.
One of the best money management tips we can impart is to set up an automatic payment for your car payment through a credit card. Then, go to your credit card’s online account and apply the same amount of your car payment to the credit card each month.
That way, interest doesn’t accrue, and your credit history builds. We’ll discuss why that’s important more in a moment.
Pay Balances In Full Each Month
Again, figure out when credit card spending times or due dates arrive. Set up an automatic payment for the full balance of your card each month. This should keep you from going on spending sprees that you can’t afford.
Use It For Only What You Can Afford
Getting a credit card for credit scores is the best reason to have one. It’s not so you can buy things that you don’t have the money for in your bank account.
Yet, each year, millions of Americans do this and find themselves in difficult financial situations. They think simply making the minimum payment will keep them out of trouble, too. But that’s when the exorbitant interest rates kick in.
For those of you who do have to carry a balance, make sure you’re paying more than the minimum payment each month. Otherwise, it could take years, even decades, to pay off your debt.
So Why Have One?
Inevitably, you’re going to need to spend money in a quantity that your emergency fund can’t possibly handle. It could be a large medical expense, a car repair or purchase, or getting a mortgage.
Having a good credit score is essential to making these purchases. How do credit cards affect credit score highs and lows? Well, if you’ve shown you’re responsible, a lender isn’t going to have any problem working with you on such a large purchase.
Learning How to Use a Credit Card to Increase Credit Score Is Doable
We hope this information on how to use a credit card to increase credit score is beneficial. With great spending power, comes great spending responsibility. These give you the best chance at showing your worth.
Good luck as you set out to build your credit score. For more money management best practices, check out some of our additional posts!