There are many ways that you can build up your credit score. For instance, you can look into debt consolidation loans if you’re having trouble paying back several credit cards at the same time. You might also dispute errors you find on your credit report.
However, your credit cards are one of the most crucial tools you can use to improve your credit score. We’ll discuss some ways you can do that in the following article that some people might not necessarily know.
1. Pay Back Your Bills Strategically
You probably know that if you carry a credit card balance from one pay period to the next, you have to pay interest on it. If you do that, you’re not getting anything back from that money you’re spending, so it’s something you want to avoid.
Paying your entire balance before each cycle ends, though, is an ideal way to improve your credit score. If you don’t carry a balance from one payment period to the next, that means you have a very low credit utilization ratio. Your credit utilization ratio is determined by looking at how much borrowing power your credit cards give you vs. how much you’re using.
The lower your credit utilization ratio, the better it is for your credit score. That should incentivize paying off your credit card bills on time just as much as avoiding paying any interest.
2. Get a Higher Credit Limit
If you’re working at building your credit score, you can also ask your credit card company for a higher credit limit. If you show a record of consistently paying off your balance on time, a company will probably be willing to give you one.
If you’ve got a higher credit limit and still don’t carry any balance on your card from one pay period to the next, that means you’re doing even better with your credit utilization ratio. You have more borrowing power, but you aren’t using it. That will translate to your credit score increasing.
3. Credit Piggybacking
Maybe you know someone in your family with excellent credit. They always pay their entire credit card balance and never carry it from one pay period to the next.
If so, you can ask them if they’re willing to add you as an authorized user to their account. You don’t actually have to use their credit card. That card account’s credit will be added to your credit utilization, though. Once again, you’ll have credit you’re not using.
Some people call this “credit piggybacking.” You’re using a friend or relative’s smart payment habits to improve your own credit score.
Credit Cards Can Help Build Your Credit Score
If you’re selective about how you use credit cards, you can utilize them as tools to build up your credit score. You might use credit piggybacking by getting someone with good payment habits to put you on their card account. You don’t have to use their card, but their account’s credit will improve your credit utilization ratio.
You can also attain a better credit utilization ratio by asking for one of your credit card companies to extend your credit limit. That means you have more credit available that you’re not using, which will cause your score to rise.
You can also pay off your entire credit card balance every pay period, so you don’t carry anything over to the next one. That will keep your credit utilization ratio low, and you won’t have to lose any money to interest payments either.
Credit cards can help you raise your credit score slowly but surely if you follow the steps we’ve laid out.