How to improve your credit score with a credit card
The main problem with most people’s credit score is that they rarely ever think about it…until they need it. At that point, it can be too late.
Applying for a loan or securing a mortgage aren’t the only times you’ll need a good credit score. In some instances, potential landlords and employers may also want to take a look at your score.
To be proactive, you should check your credit rating at least once per year — then regularly build and maintain your score. Fortunately, you can easily give your credit score a boost with an item that might already be in your wallet…your credit card.
First, why is your credit score so important?
Brad Komistek, Branch Manager at Assiniboine Credit Union St. Vital, has examined hundreds of credit scores when considering loan applications.
A credit score of 650 and higher indicates someone who manages their credit well,” Brad explains. “If a credit score is 625 or lower, we’ll look at why the score is in this range. If it’s because they’ve missed payments or have not managed their existing credit as agreed, it heightens the risk to a lender and can affect the applicant’s ability to be approved for new credit.”
If your score is excellent, you could qualify for the better credit cards and the best interest rates on personal loans. If it’s low, however, you may have to pay higher rates or could even struggle to find a lender willing to take a chance on you.
Your credit score can also have an impact on where you live since many landlords view your credit report as an indication of whether you’re likely to pay your rent on time.
How your credit score is calculated
Credit cards can have both positive and negative impacts on your credit score, as do several other important factors. Luckily, you hold a lot of control.
- Your payment history: This includes credit cards, lines of credit, mortgages, car payments and loans, with late or missed payments counting against you.
- Your credit balance compared to available credit: High credit balances will have a negative impact on your score.
- Bankruptcy: Public records of bankruptcy or collection issues can damage your credit score for several years.
- The length of your credit history: Lenders like to see that you’ve been able to handle credit properly, over a long period of time. That’s why building your credit history as soon as possible will pay off over the long term.
- The number of inquiries: Each time you apply for credit, an inquiry is registered on your credit report. If you apply for a lot of credit at once, this suggests you are in financial difficulty and it will lower your score.
How to build or improve your credit score with a credit card
“One of the easiest ways to improve or build your credit rating is by taking out a credit card,” says Brad. “A strong credit history proves that you can manage debt.”
Brad has the following tips to help you build and improve your credit score:
- Keep your accounts active: Use your cards but try to pay off the balance each month. This has the added advantage of keeping your interest payments to a minimum.
- Show you can manage debt responsibly: Ensure you make your minimum payment, and never miss a payment or it will reflect poorly on your credit score.
- Watch your balance: Get a card with a low limit and keep your balance below 30% of that credit limit. A higher balance will go against you.
- Don’t apply for lots of credit cards: You’ll look like a credit-seeker who might be abusing credit or also in financial difficulty.
Getting started with a credit card from ACU
You can set yourself on the road to a good credit score with an ACU Collabria Visa credit card. Getting a jumpstart now will build your good credit score when you need it — like when it’s time to take out a loan, apply for a mortgage or rent an apartment.
Learn about the wide range of low and no-fee credit cards that can help you build your credit history here.
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