Your credit score is an important indicator of your financial health, and it can have a significant impact on your ability to secure loans, rent an apartment, and even get a job.
If your credit score is lower than you’d like it to be, one effective way to raise it is by using a credit card responsibly.
Credit cards offer a convenient and accessible way to build credit, but it’s important to understand how to use them in a way that maximizes their benefits while minimizing their risks.
In this article, we’ll explore eight strategies for raising your credit score with a credit card, from choosing the right card to paying your bill on time, and everything in between. With these tips, you can take control of your credit and work towards a healthier financial future.
How to Raise Credit Score With Credit Card
Your credit score is an important measure of your creditworthiness, and having a good credit score can help you qualify for better interest rates on loans and credit cards, as well as increase your chances of getting approved for rental applications or even job offers.
If you’re looking to raise your credit score, using a credit card responsibly can be a helpful tool. Here are eight ways to raise your credit score with a credit card.
1. Make on-time payments
Your payment history is the most important factor in determining your credit score, accounting for 35% of your score. Making on-time payments is critical to maintaining a good credit score.
Paying at least the minimum payment on time every month is the bare minimum to avoid late fees and negative marks on your credit report.
However, to truly raise your credit score, you should aim to pay your balance in full every month. Late payments, even by just a few days, can have a significant negative impact on your credit score.
2. Keep your credit utilization low
Credit utilization is the amount of credit you’re using compared to the total credit you have available. For example, if you have a credit card for investment with a $10,000 limit and you’ve charged $3,000 to the card, your credit utilization is 30%.
A high credit utilization can hurt your credit score, as lenders may see you as a riskier borrower. Ideally, you should aim to keep your credit utilization below 30%, although some experts recommend keeping it below 10% to maximize your score.
If you have a high credit utilization, consider making multiple payments per month to reduce your balance, or ask your credit card issuer for a credit limit increase (but be sure to use the increase responsibly!).
3. Use different types of credit
Your credit mix accounts for 10% of your credit score, and having a mix of different types of credit (such as credit cards, auto loans, and mortgages) can help your score.
If you only have credit cards, consider opening a different type of credit account to diversify your credit mix.
However, keep in mind that you should only open new accounts if you can manage them responsibly and avoid racking up debt.
4. Apply for credit strategically
Every time you apply for credit, the lender will check your credit report, which is called a “hard inquiry.” Hard inquiries can lower your credit score by a few points, so you should avoid applying for credit unnecessarily.
However, if you’re looking to raise your credit score, you may want to consider applying for a credit card that’s specifically designed for people with fair or bad credit.
These cards may have higher interest rates or fees, but they can help you build credit if you use them responsibly.
5. Keep old accounts open
The length of your credit history makes up 15% of your credit score, so it’s generally better to keep old accounts open rather than closing them.
Even if you’re not using an old credit card, keeping it open can help your score by increasing the average age of your accounts. However, if you’re paying an annual fee for an old credit card that you’re not using, you may want to consider closing it or asking your credit card issuer if they can waive the fee.
6. Avoid maxing out your credit cards
Maxing out your credit cards (or coming close to your credit limit) can hurt your credit score by increasing your credit utilization.
Additionally, maxing out your credit cards can make it more difficult to pay off your balances, which can lead to missed payments and even more negative marks on your credit report.
If you’re struggling to pay off your credit card balances, consider reaching out to a credit counselor or financial advisor for help.
7. Monitor your credit report
Checking your credit report regularly can help you catch any errors or inaccuracies that could be hurting your credit score.
You’re entitled to a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year, so take advantage of this by requesting your reports and reviewing them for accuracy.
If you find any errors or inaccuracies, dispute them with the credit bureau and the lender reporting the incorrect information.
8. Don’t close accounts after paying them off
Closing credit card accounts from the bank, after paying them off can seem like a good idea, but it can hurt your credit score. Closing accounts can lower your available credit, which can increase your credit utilization.
Additionally, closing accounts can shorten your credit history, which can also hurt your score. Instead, consider keeping old accounts open (even if you’re not using them) to maintain your credit history and available credit.
Note: By following these tips, you can build a strong credit history and increase your chances of qualifying for the best interest rates and credit offers in the future.
How Long Will It Take for a Credit Card to Improve My Credit Score
It can take 6 months to one year to improve the credit score of a credit card. The length of time it takes for a credit card to improve your credit score depends on several factors, including your starting credit score, how you use the credit card, and how often the credit card issuer reports your activity to the credit bureaus.
Generally, it can take at least six months, and possibly even a year or more, to see a noticeable improvement in your credit score.
If you’re starting with a low credit score, it may take longer to see improvement. However, if you use your credit card responsibly by making on-time payments and keeping your credit utilization low, you can start to see positive changes in your credit score within 3 months.
It’s important to be patient and consistent in using your credit card, as building a good credit score is a gradual process that takes time.
Another factor to keep in mind is how often your credit card issuer reports your activity to the credit bureaus.
Some issuers report to the bureaus monthly, while others may report less frequently. If your issuer reports infrequently, it may take longer for your credit score to reflect your responsible credit card use.
Will Getting a New Credit Card Affect My Score
Yes, getting a new credit card can potentially affect your credit score, but the impact can vary depending on several factors.
When you apply for a new credit card, the issuer will typically make a hard inquiry on your credit report, which can cause a temporary dip in your score.
The impact of a hard inquiry can vary, but it usually only lowers your score by a few points and typically lasts for only a short period.
Opening a new credit card can also affect your credit utilization ratio, which is a major factor in your credit score.
If you use the new card and accumulate debt, it can increase your overall credit utilization and lower your score.
However, if you use the new card responsibly and keep your credit utilization low, it can improve your score by increasing your available credit.
Related: Reasons behind credit card declined at gas stations.
Does Adding a Credit Card Improve Your Credit Score
Adding a credit card can potentially improve your credit score if you use it responsibly. Using a credit card can help you establish a positive credit history by showing that you can make on-time payments and manage credit responsibly.
Additionally, a new credit card can increase your available credit, which can lower your credit utilization ratio and potentially boost your score.
How Many Points Does a New Credit Card Raise Your Score
The impact of a new credit card on your credit score can vary depending on several factors. Generally, adding a new credit card can potentially raise your score by a few points if you use it responsibly.
The new credit card can increase your available credit, which can lower your credit utilization ratio and potentially boost your score.
However, the impact of a new credit card on your score is usually small and temporary, and other factors such as payment history, credit utilization, and length of credit history have a bigger impact on your overall credit score.
How Long Does Getting a New Credit Card Hurt Your Credit
It can hurt your credit score in a month. If you are lucky it can take up to 6 months. Getting a new credit card can potentially hurt your credit score for a short period of time.
When you apply for a new credit card, the issuer will typically make a hard inquiry on your credit report, which can cause a temporary dip in your score.
The impact of a hard inquiry can vary, but it usually only lowers your score by a few points and typically lasts for only a short period.
Opening a new credit card can affect your credit utilization ratio if you use the new card and accumulate debt.
If you use the new card responsibly and make on-time payments, any negative impact on your score should be temporary and eventually replaced by positive impacts from responsible credit use.
Also read, Finding lost debit card at home.
Does Applying for a Pre-Approved Credit Card Affect Credit Score
Yes, applying for a pre-approved credit card can potentially affect your credit score. When you apply for a pre-approved credit card, the issuer will typically make a hard inquiry on your credit report, which can cause a temporary dip in your score.
However, pre-approved offers are typically based on a soft inquiry, which does not impact your credit score.
It’s important to check whether the issuer will make a soft or hard inquiry before accepting a pre-approved offer.
If it’s a hard inquiry, it’s important to only apply for offers you’re serious about and to make on-time payments to ensure that any temporary impact on your score is minimal.
Does Applying for Credit Card Hurt Credit if You Have None
If you don’t have any credit, applying for a credit card can potentially affect your credit score. The issuer will typically make a hard inquiry on your credit report, which can cause a temporary dip in your score.
If you’re approved for the card and use it responsibly by making on-time payments and keeping your credit utilization low, it can help you establish a positive credit history and improve your score over time.
Related: Ideas for getting a metal debit or credit card.
Credit Score Dropped 50 Points After Opening Credit Card
It’s not uncommon for a credit score to drop by around 50 points after opening a new credit card, particularly if you have a limited credit history or high credit utilization.
When you apply for a new credit card, the issuer will typically make a hard inquiry on your credit report, which can cause a temporary dip in your score.
Additionally, if you use the new card and accumulate debt, it can increase your credit utilization ratio and lower your score.
If you use the new card responsibly and make on-time payments, any negative impact on your score should be temporary and eventually replaced by positive impacts from responsible credit use.
How Often Should You Use a Credit Card to Build Credit
Using a credit card regularly is one way to build credit, but it’s important to use it responsibly. Experts recommend using a credit card for small purchases that you can pay off in full each month.
This shows lenders that you can use credit responsibly and make on-time payments, which can help improve your credit score.
Using your credit card too frequently or carrying a balance from month to month can lead to high levels of debt and hurt your credit score.
Note: Keep your credit utilization ratio low, which is the amount of credit you’re using compared to your total available credit.
A good rule of thumb is to aim for a credit utilization ratio of 30% or less. Overall, using a credit card responsibly can help build credit, but it’s important to use it wisely and within your means.
How to Get a Credit Card With No Credit
If you have no credit, you may still be able to get a credit card by applying for a secured credit card or becoming an authorized user of someone else’s credit card.
Secured credit cards require a cash deposit as collateral and typically have lower credit limits, making them easier to qualify for.
Becoming an authorized user on someone else’s credit card allows you to use their credit history to build your credit, but it’s important to make sure the primary cardholder uses credit responsibly.
Conclusion
In conclusion, using a credit card responsibly is one of the easiest and most effective ways to raise your credit score.
By paying your bill on time and keeping your balances low, you can show lenders that you’re a responsible borrower and improve your creditworthiness over time.
Choosing the right type of credit card and using it wisely can help you build a positive credit history, which can have long-term benefits when it comes to securing loans, getting lower interest rates, and more.
As with any financial decision, it’s important to do your research, understand the risks and benefits, and make informed choices about your credit use.
With these tips and strategies, you can take control of your credit and work towards a healthier financial future.
FAQ’s
Can using a credit card too much hurt my credit score?
Yes, using a credit card too much can hurt your credit score if it leads to high levels of debt and a high credit utilization ratio. It’s important to use credit responsibly and keep your balances low.
What’s the best type of credit card to use to build credit?
A secured credit card or a student credit card can be a good option for building credit. These cards often have lower credit limits and may be easier to qualify for, making them a good choice for those with limited or no credit history.
How much of my credit limit should I use to build credit?
Ideally, you should aim to use no more than 30% of your credit limit to build credit. This will keep your credit utilization ratio low and help demonstrate responsible credit use to lenders.
Will closing a credit card hurt my credit score?
Closing a credit card can potentially hurt your credit score by reducing your available credit and increasing your credit utilization ratio. However, if you’re closing a card with a high annual fee or that you no longer use, it may be worth taking a temporary hit to your score to save money in the long run. Just be sure to pay off any remaining balances before closing the card.
Can I improve my credit score by applying for multiple credit cards at once?
Applying for multiple credit cards at once can hurt your credit score by causing multiple hard inquiries on your credit report. It’s best to space out your credit card applications and only apply for cards that you’re likely to be approved for.
Should I cancel a credit card that I never use for credit score?
If you have a credit card that you never use, it may be tempting to cancel it. However, it’s important to consider the impact on your credit score. Canceling a card can reduce your available credit and increase your credit utilization ratio, both of which can hurt your score. If the card has a high annual fee or you’re concerned about fraud, you may want to consider keeping it open but not using it.