Tips for Credit Card Management to Optimize Your Credit Score
Your credit card management affects your credit score, which in turn affects whether you can get an auto or home loan and what the interest rate will be when you get the loan; but it also has an impact on the price of your auto insurance, whether you can rent an apartment, and may even be a factor in future job hunts. It may not be fair, but it’s a fact of life: credit and debt management affect every aspect of your finances. Here are a few tips for handling credit to improve your score.
1. First, in order to have a credit score, you have to have a credit report. This gets established by opening credit accounts of some sort. Retail store credit cards are often the easiest to obtain.
2. Make sure all payments are made on time. Even if you make a double payment the next month, a missed payment can be reported and lower your credit score. By the way, the importance of paying on time does not only include credit card accounts. Late utility and rent payments are often reported to credit bureaus and factored in to your credit score. Complete credit management includes all forms of debt management.
3. Use your credit cards. If you have credit cards that you never use, they don’t benefit your credit score and can lower it somewhat.
4. Don’t acquire too many credit cards or let your limit get too high. Oddly enough, having a sky-high line of credit (which would seem to indicate that you are extremely credit-worthy) can lower your score. The availability of too much credit for your income signals a red flag. Lenders fear that you might suddenly go out and make major purchases on that line of credit that you then can’t afford to pay off.
5. Make a lot of money. Okay, that’s a bit of a laugh, but seriously, as your income increases, your ability to make payments on credit accounts goes up as well. If you have a significant amount of discretionary income, then your credit limits can be higher, but if you make just enough to pay the bills, make sure you just have a couple of credit cards with modest available credit lines.
You can find credit management tools on this website and from many non-profit agencies. Understanding the basics and paying attention to how you manage your money will get you off to a good foundation with respect to both your credit report and your score.
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