The average outstanding credit card debt is about $5,300. That is a lot, considering how first-time credit card users usually get a credit limit of about $1,500. But how did the outstanding credit debt reach more than five grand?
That only comes with a lack of knowledge on credit card usage and how to increase credit score. People will continue spending credit, thinking they can get away without issue.
Do you need to learn the best way to use a credit card to build credit and make sure this doesn’t happen? Read about these simple tips to help you discover more.
How to Increase Credit Without History
If you don’t have a credit card yet, there are other ways you can increase your credit score.
The other methods are:
Renting – Renting an apartment or house can require a background check. Monthly payments are tied to your name, building up your credit score without a credit card.
Store Card – Many stores offer a reward/credit card to go with your purchases. Signing up for these cards can be an entry to increasing credit.
The Best Way to Use a Credit Card to Build Credit
Always treat a credit card like it’s cash. It’s tempting to spend credit and pay for it later when your paycheck comes in, but the debt will compound.
You want to be able to keep track of your spending and make sure you don’t go over your desired spending limit. Utilizing finance specialists can help make sure your finances are up to par.
Here are a few sites that can give helpful financial solutions:
Pay on Time
Settling your debt on time is one of the most critical factors to your credit score. Credit cards have different billing cycles that range from 28 to 31 days. Within each given cycle, you want to make sure you pay your minimum payment to avoid your credit score from going down.
But, it is always best to pay your entire credit statement for a billing cycle. Doing so will ensure interest isn’t accrued on your account. This is one of the best way to use a credit card to build credit.
Increase Credit Limit and History
Having a higher credit limit is crucial to building credit. It gives you more credit to spend, and it also gives you more room to decrease your utilization ratio.
If your utilization ratio is low, creditors are more likely to give you loans at a low-interest rate. The reason is that they see you don’t overspend and know you can handle your finances well.
But how do you increase your credit limit?
You can always contact your cardholder and request a higher credit limit. If you don’t want to, you can open a new card and leave it. Opening a new card can slightly damage your credit score.
Still, it can rebuild and give you a higher credit limit, thus lowering your overall utilization ratio.
Never Close Credit Cards
Whether a card has been used or not, having a long credit history is always beneficial to your credit score. The life of your credit card will reflect well on your credit score when creditors see that you kept your spending to a minimum.
The credit card(s) can sit in your desk or wallet, and you get to reap the benefits of a lower utilization ratio.
Watch Your Credit Grow
This is the best way to use a credit card to build credit. You must pay your debt on time, track your spending, and keep a low utilization ratio.
Keeping up with your finances and credit cards like this will quickly increase your credit score. It will go up slowly, but credit scores and history will take time. You can track your credit score by checking with the top credit bureaus.
If you thought this helped, feel free to check out our other helpful finance blogs.