how to use a credit card to build credit

How to Use a Credit Card to Build Credit: A Simple Guide

Published by Captain Cash | Credit | No Comments

When’s the last time you took a look at your credit report? If it’s been a while, are you avoiding it because your credit is not as good as you would like?

Having credit that is less than perfect may not be what you want, but it is a common trait with many adults today.

The good news is that you can change your credit. You can improve it and increase your score, and you might be able to do this by using a credit card.

Are you interested in learning how to use a credit card to build credit? If so, here is a guide that will tell you everything you need to know to get started using a credit card as a way to build your credit.

Learn the Basics of What Makes Up a Credit Score

To use a credit card for building credit, you would benefit by learning what makes up a credit score. If you can recognize this, you’ll likely have an easier time making the right decisions with your credit card.

Here is a breakdown of the factors that make up a credit score:

  • 30% – Amount you owe
  • 35% – Your payment history
  • 10% – The credit mix you have
  • 10% – The mixture of credit you have
  • 15% – The length of your credit history

A credit card can affect all of these things, and that’s why using one is an excellent way to build your credit.

Start With a Secured Card

One challenge you might face is getting approved for a regular credit card if you have bad credit. To make this easier, you should start by applying for a secured card.

A secured card is an excellent choice for people with bad credit or no credit, and it is terrific for young people who are just starting.

To get a secured card, you’ll have to apply for one and agree to put down a deposit. The credit card company will keep your deposit until you prove that you are creditworthy. In exchange, you’ll get a credit card with a low credit line.

Getting a secured card builds credit by offering a way to boost your credit mix. When you add any new credit, you build the 10% credit mix. The result may be an increase in your score.

Use the Card Every Month

After receiving the card, you’ll need to activate it. Once you complete this step, you can start using the card for purchases. To build your credit with it, you should use it every month for regular purchases.

You should not use the entire credit line, though. It would be best if you stuck with using only 30% or less.

For example, if the card has a credit line of $500, you should never charge more than $150 for a month.

Using the card each month helps you build a positive payment history. This factor of your score makes up 35% of it, so it’s a smart idea to use the card every month.

Using only a portion of the available credit allows you to build credit without affecting you negatively. If you use the full credit line, it impacts your credit utilization rate.

When this rate gets too high, it affects the factor of how much you owe, which makes up 30% of your score.

Set Up Automatic Payments

When you get the card, you will likely have the option of setting up an app on your phone or an account on your computer. You should complete this step, and while you’re doing it, set up your account to make automatic payments.

Setting up automatic payments offers two benefits for you. First, you’ll never miss a payment, so you’ll protect your credit. Two, you’ll always pay off the full balance you owe.

When you set this up, you’ll have the choice to pay the minimum balance, the full balance, or a different amount. Always choose to pay the total balance.

You’ll never end up carrying over a balance to the next month by choosing this option. You’ll also avoid paying interest charges, too.

Paying each month also keeps your total amount owed balance low as you build a positive payment history.

Ask a Loved One to Add You As an Authorized User

Using a secured card will build your credit over time, but did you know that there is an instant way of improving your credit?

If you want to see a massive increase in your credit score instantly, find someone close to you that is willing to add you to their credit card account.

Anyone can add your name as a registered user to an existing account, but you’ll want to select a person with excellent credit.

When the person makes this request, the credit card company will not run a credit check on you. They will, however, add that person’s credit history for that particular card to your credit report.

If the person’s credit is perfect for that card, you could see a substantial increase in your score as soon as the posting hits your report.

Having good credit is helpful for so many things in life, and it’s worthwhile for you to take the right steps to achieve it.

Another Tip to Learn How to Use a Credit Card to Build Credit

If you ever find yourself in a bind and cannot pay off the balance of your credit card by its due date, don’t skip the payment.

Instead, you could consider taking a payday loan. Payday loans are fast and straightforward, and getting one would provide you with instant cash. You could use this cash to pay off your credit card, and this would protect the credit you’re working hard to build.

Are you interested in learning more about how to use a credit card to build credit? Check out our site for more information on this subject or to apply for a cash advance

Benefits of Having a Good Credit Score

The Benefits of Having a Good Credit Score

Published by Captain Cash | Credit | No Comments

You may have always heard the saying, “always keep good credit.” This term does not only revolve around getting and maxing out a credit card, but it’s so much more than that.