Using a credit card is actually a great way to build credit. Credit cards can help raise your credit score since using them responsibly touches on every factor that impacts your credit score.
Using credit cards to build credit
Every consumer gets a credit score and a credit report from each of the three major credit bureaus. There are a total of five factors that can impact a persons credit score.
These five factors are:
Payment History: 35%
Credit Utilization: 30%
Credit History: 15%
Credit Mix: 10%
New Credit: 10%
How do credit cards affect credit scores
When you make consistent payments on your credit card, the Payment History factor in your credit score will increase and thus lead to a higher score.
Credit Utilization, or how much of your available line of credit you use, is the second largest factor that impacts your credit score. Ideally, consumers should not use more than 30% of their total credit limit in order to see their score increase.
Over-utilization of credit (usually over 30% utilization) can lead to a lower credit score. This is because creditors and lenders may think that you are in a cash bind.
If you are utilizing more than 30% of your total available line of credit, call your credit card company and ask for a credit limit increase.
Credit History tells a creditor or lender how long you have been responsibly using credit. Usually, lenders get nervous when a person with no credit history applies for a line of credit.
Lenders want to see a person who as “experience” working with credit and paying back credit cards.
Credit cards can actually be one of the most efficient ways consumers can give their credit score a raise. If you have less than perfect credit and don’t know where to go, CrediReady can help.
Our trusted network of credit repair experts can boost your score and help you qualify for the credit you need. Take a moment to fill out our free no-obligation credit repair inquiry form and start fixing your credit today!