Credit cards will claim the demise of many household finances with long-term debt to plague family budgets. The cards are easy to use and difficult to manage. Some people give up using the cards in order to maintain a good budget. This action hurts their credit score in return. People need to learn how to use credit cards to their advantage without suffering from money loss or lowered credit scores. If they are so difficult to manage, why are credit cards good to have?
1. Revolving credit differs from installment loans. Your credit report wants to see well-managed accounts in order to evaluate your money management ability. It is good to have both types to promote the best score.
2. Multiple cards show that you have control of your spending power or it shows that you don’t. The trick is to not allow you the freedom to spend the credit limits without the resources to pay it back swiftly. Keep balances less than 30% in order to have your credit card use help your score.
3. Learn to rotate use. Instead of using multiple credit cards each month, rotate your accounts. Use them one per month. Make a charge to show activity but pay it off in the end. Change cards the next month and do the same. This action keeps your credit cards in active use without any of the damage to your credit utilization rate. You show use with limited or no balance. Your credit cards will be an asset within your credit report.
Be proactive to support positive credit card activity
4. Don’t cancel cards especially if there is a remaining balance due. This action will raise your credit utilization rate. It compares If you feel you must cancel a card, do so to one that is young and not used. Don’t cancel multiple cards at once. Stagger the action leaving several months in between each one so your credit has a chance to stabilize. The cards themselves are not bad for you, the overuse and long-term balances are.
5. Be smart about applying for new credit. If you have filled credit cards and are hoping to get another to help with the budget, your request will come back to hurt you. Remember, hard inquiries into your credit counts as a negative. It takes points away from your score and leaves a mark to show others they are looking at you. A new line of credit would open up an opportunity to make a high ticket purchase affordable. With a zero interest introductory offer or possible debt transfer you can make monthly payments easier to manage. Be smart about when you apply and with what company. Research the cards to see if your credit score would even get you approved. It makes more sense to not apply if you know you the company expects a higher rate for approval.
Don’t let credit card use make you credit challenged. When you run out of options and interest rates increase, your debt will be that much harder to pay. It is better to focus on lowering your debt totals below 30%. Keep potential options open instead of having to fall upon fast cash advances to meet the end of the month budget demands.
