Build better credit with your credit card
Chances are that when you hear credit card, the first thing that comes to mind is shopping, but you may be interested to know that you can use your credit card to build credit. Since it is one of the most widely used methods when it comes to building credit.
If you are rebuilding credit from scratch, it would be a bit complicated to get a credit card. Because for a bank to give you and even offer you a credit card depends on the quality of your credit. In other words, if you are a person with bad credit, getting a credit card would mean worsening your credit even more.
The best thing to do before applying for a credit card is to learn how to use and manage it wisely.
The types of credit cards you can apply for depend on your credit score. Therefore, before you start applying for credit cards, you need to know what your credit score is so you can apply for the right ones.
According to Experian your credit score is classified as follows:
Exceptional: 800-850, Very Good: 740-799, Good: 670-739, Poor:580-669, Very Poor: 300-57.
This information will help you choose which cards are best for you.
Your credit score is made up of the following, each of which can affect your credit score in different ways. According to FICO.
Payment history: 35
Amounts owed: 30%
Length of credit history: 15%
New credit: 10%
Credit mix: 10%
This way FICO will look at what types of debt you have differently. It will look at how much debt you have overall, how much of your available credit you are using, and how much you still owe in revolving debt such as credit cards and installment loans like student loans and mortgages when calculating your score.
While it’s true that using credit cards is one of the best ways to build credit, you should also keep in mind that you shouldn’t have too many – it’s best to avoid it.
It can be tempting to get too many credit cards, especially with rewards and special offers for in-store financing. While there is nothing wrong with opening more than one credit card account, there are no simple rules about how many cards are too many.
However, there definitely comes a point where managing multiple accounts is more problematic and can cause you to get out of bad credit, instead of getting out of bad credit, you get into even more debt and ultimately fail to improve your credit, which is what you were looking for in the first place.