Most of our credit repair clients think that having credit cards is dangerous or damaging to your credit. But if you really want to improve your credit profile, credit cards can be a big help. Having the right number of credit cards can account for about 30% of your overall credit rating.
Credit cards can help you:
• Offset the damage caused by negative items
• Establish a stable credit history
• Raise your credit score fast
While having credit cards is important to your credit rating, it’s just as important to make sure you have the right number of cards and that you manage them appropriately:
• Have the right number of cards: having too many cards can make you appear to be overburdened with debt. Not having enough makes it difficult to establish a strong credit history. The recommended number of cards to have is 3 to 5.
• Watch your balances: The amount of debt you have (in proportion to your limits) can have effect your score. This is known as a balance-to-limit ratio. It’s suggested that you never spend more than 20% of your credit limit.
• Pay in full: many people are under the impression that paying the minimum balance on their cards each month is sufficient, or maybe even beneficial. To the contrary, it’s often best to pay your entire balance in full every month.
• Pay on time: Again, many people assume that simple late-payments aren’t much to worry about. But the truth is, having a history of late-payments can really bog down your credit score. Make sure to always make your credit card payments on time.
• Age your accounts: A common misconception is that it’s wise to close your credit accounts as soon as they’re paid off. But having a long, steady credit history is vital if you want to optimize your credit profile. Keep your credit accounts open and active for as long as possible, unless there’s a good reason to do otherwise.
Using credit cards appropriately is one of the best things you can do to improve your credit. Don’t let bad experiences or popular misconceptions steer you away from one of the most valuable tools available to optimize your credit.
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