By properly managing a credit card, you can earn rewards and build your credit score, all while making your regular purchases.
Get the Right Card
The first step to best using a credit card is to get the right one. That means doing your research. You should consider your spending habits and priorities when it comes to rewards. Are you an avid traveler who wants to earn miles? Or maybe you’d rather just get cashback. If possible, it’s wise to avoid cards that charge annual fees or have extremely high-interest rates.
Once you’ve decided on your priorities, search for cards that will work with your current situation. You should only apply for a card once you feel fully confident that this card will suit your needs and give you the best deal. You should also be fairly confident that you will qualify for it—if your credit score is too low, the company won’t approve your application. Never apply for a card if you’re uncertain whether you can make payments.
Pay Your Card On Time
The single biggest thing you can do with your card to build your credit score and protect your finances is to make your payments on time. You don’t want to be consistently making late payments because that will have a big negative impact on your score.
Don’t Borrow Too Much at Once
You’ll need to keep an eye on how much you’re borrowing. When you’re approved for a credit card, you’ll be given a credit limit. This is the max amount that the credit card company will let you borrow at one time. The percentage you use of available credit is your credit utilization ratio. The rule is to keep your ratio under 30%. This is a healthy credit debt as determined by the credit monitoring agencies.
Use Your Card
With that in mind, don’t be afraid to use your credit card. While simply having a card can have a positive impact on your credit score, it will be much more helpful if you actually use it. Consistent use builds your credit history and shows potential lenders that you can borrow and pay back money responsibly.
Diversify
Finally, while a properly managed credit card can give a good boost to your credit score, it will be even better if it isn’t alone. That means that auto loans, a mortgage, and other kinds of loans can also have a positive impact on your score. Within reason, the more borrowing history that you have, the better. Of course, you also want that history to be filled with accounts where you made steady payments and eventually paid them off.
Noble Credit Union, voted one of the best credit unions in California, offers offer members full access to a wide range of financial services, including MyRewards Visa credit card, personal loans, online and mobile banking, new and used vehicle loans, and more. For more information about membership at Noble Credit Union, call (559) 252-5000 or visit NobleCU.com.