Using a credit card can be an effective way to boost a consumer's credit score over the long-term. By using the card correctly, the consumer may be able to increase his credit score and get approved for financing more easily. The way that the card is used will have a profound impact on the credit report of the individual.
Use Credit Wisely
The way that the card is used to make purchases has a big effect on the credit score of the individual. For example, making small purchases with the card and then paying off the balance in full every month is one of the best things that a creditor can do to boost his credit score. One of the biggest factors in calculating a credit score is the payment record of the individual. If the cardholder always makes his payments on time, it will boost his score by quite a bit over the long-term.
Paying Down Card Balance
When a consumer has a large balance on his credit account, this will negatively impact his credit score. The FICO formula that is used to come up with a consumer's credit score puts an emphasis on having a low amount of debt. If the balance on the card is more than 30 percent of the available credit on the account, this is a negative. Consumers should try to pay down the balance is below this 30 percent mark so that they can boost their credit scores. As soon as the balance is paid down below this level, it will have an immediate effect on the credit score the next time it is calculated.
Fraudulent Purchases
Credit cards can sometimes be compromised and used to make fraudulent purchases. When an identity thief takes a credit card and uses it to make several purchases without the card holder knowing, it can hurt that person's credit score. In some cases, identity thieves open new card accounts in the name of another person. They then start making purchases with this new card and the victim may not even know its happening. Because of this threat, it is generally a good idea for consumers to check their credit reports regularly so that they can see if any new credit accounts have been opened.
Leave the Account Open
After paying off a large amount of debt on a card, many consumers take the step of closing out their account. While this can be a good way to eliminate the temptation of spending more money on the card, it can also work against the consumer when it comes to boosting their credit profile. One of the items that the credit bureaus look at when they are calculating a credit score is the length of time that accounts have been opened. Accounts that have been open longer hold more weight in the eyes of the bureaus. Instead of closing out an older account after the debt has been paid off, it is usually a better idea to leave the account open. The consumer does not have to use the account that much, but having it open can help his credit score.
Using a card responsibly can significantly boost a consumer's credit score. Implementing some of these strategies could lead to lower interest rates on loans and easier approvals in the future.
Use Credit Wisely
The way that the card is used to make purchases has a big effect on the credit score of the individual. For example, making small purchases with the card and then paying off the balance in full every month is one of the best things that a creditor can do to boost his credit score. One of the biggest factors in calculating a credit score is the payment record of the individual. If the cardholder always makes his payments on time, it will boost his score by quite a bit over the long-term.
Paying Down Card Balance
When a consumer has a large balance on his credit account, this will negatively impact his credit score. The FICO formula that is used to come up with a consumer's credit score puts an emphasis on having a low amount of debt. If the balance on the card is more than 30 percent of the available credit on the account, this is a negative. Consumers should try to pay down the balance is below this 30 percent mark so that they can boost their credit scores. As soon as the balance is paid down below this level, it will have an immediate effect on the credit score the next time it is calculated.
Fraudulent Purchases
Credit cards can sometimes be compromised and used to make fraudulent purchases. When an identity thief takes a credit card and uses it to make several purchases without the card holder knowing, it can hurt that person's credit score. In some cases, identity thieves open new card accounts in the name of another person. They then start making purchases with this new card and the victim may not even know its happening. Because of this threat, it is generally a good idea for consumers to check their credit reports regularly so that they can see if any new credit accounts have been opened.
Leave the Account Open
After paying off a large amount of debt on a card, many consumers take the step of closing out their account. While this can be a good way to eliminate the temptation of spending more money on the card, it can also work against the consumer when it comes to boosting their credit profile. One of the items that the credit bureaus look at when they are calculating a credit score is the length of time that accounts have been opened. Accounts that have been open longer hold more weight in the eyes of the bureaus. Instead of closing out an older account after the debt has been paid off, it is usually a better idea to leave the account open. The consumer does not have to use the account that much, but having it open can help his credit score.
Using a card responsibly can significantly boost a consumer's credit score. Implementing some of these strategies could lead to lower interest rates on loans and easier approvals in the future.
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