Your family members probably warned you to be careful when you got your first credit card, as it’s pretty easy to make credit mistakes that can put you in the hole. Of course, many people don’t have a sense of just how much their credit card can impact their credit scores.
To help you understand, we’re going to break down what credit cards do for credit.
What Is Credit Utilization?
Credit utilization is the percentage of credit that you have in use. When you are trying to determine your credit score, the scoring models will differ. Your credit utilization for one card might be different from the next.
You might have 10% overall credit usage according to your credit report, though you also might have one credit card with a 50% utilization rate. These are very different percentages with different implications.
When it comes to your credit utilization, there are two factors that have an effect: your credit card limit and your total accessible credit.
How Can Credit Utilization Impact Your Score?
Credit utilization can impact up to 30% of your credit score, making it one of the most important factors to consider when weighing your credit score. According to Experian, it is always a good idea to keep your credit utilization at 30% or less. If you have lower revolving credit utilization, you will score better with lenders.
How To Use A Credit Card
Beyond keeping your credit card utilization low, there are a few other things that you should do to improve the way in which you manage your credit card. Do note that some of these factors will completely depend on the credit card that you have available.
Pay Your Bills Off Each Month
It is important that you make a habit of paying off your credit card bill every single month. In doing so, you will be able to keep your credit utilization low. You might want to break up your payments so that they match your paycheck, especially if you are someone who struggles with making lump sum payments.
Spread Your Expenses Out Evenly
To spread your expenses out evenly, you will need multiple credit cards. The beauty of doing this is that you can make sure your cards never go above the 30% threshold for credit utilization.
Get Zero APR
You want to look for cards that offer 0% APR when you are applying for a new credit card. If you are someone who has to carry a balance on your card, having a 0% APR card can be very helpful.
Boosting Your Credit With Tradelines
Beyond the realm of credit cards, you might look to authorized user tradelines to reach your credit score goals.
If you have any further questions regarding tradelines and how they can help you boost your credit score, make sure to get in touch with us here at Personal Tradelines to learn more! We look forward to helping you reach your financial goals.