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How to Use Your Credit Card to Improve Your Credit Rating

Posted In:  credit cards

Your credit rating is one of the most important numbers in your life. It can determine car insurance premiums, loan rates, and monthly car payment amounts. Nurture your credit rating in an intentional manner to keep it as high as possible. A credit card is a good tool for managing your credit rating when you know how to use it properly.


Don't Charge to the Limit

Part of your credit rating is determined based on the difference between the amount you've charged and the amount you're allowed to charge on each card you possess. If your revolving balance is within a few hundred dollars of your credit limit, your credit rating will suffer. Leave yourself a healthy cushion between your balance and your limit.


Always Pay on Time

Using a credit card and paying off the bill every month is a smart way to establish that you are a responsible consumer. Paying your balance in full will keep your credit rating high as long as you always make payments on time. It is a good idea to schedule your payments at least a week in advance of their due dates to ensure on-time delivery. Even one late payment can lower your credit rating for months to come.


Stick With the Cards You Have

Each time you apply for credit, your credit rating is impacted. If you are handling your finances well, you shouldn't need more than one credit card in the first place. Find a card that has a decent interest rate and use it for all of your credit transactions. It can be tough to pass up the free t-shirts or other promotional items that credit card companies offer when you submit an application. Just think of all the t-shirts and other fun things you'll be able to buy when your credit rating is high because you resisted the urge to apply for a card you don't need.


Reduce Debt as Quickly as Possible

Another factor that directly affects your credit rating is your overall debt. The more debt you carry, the lower your rating will be. Reduce your overall debt by paying off any revolving balance as soon as you can. Try to pay at least twice the minimum balance due to bring your debt down to a reasonable level. Every time you reduce your debt, you increase your credit rating.


Limit Your Number of Cards

Don't open several credit card accounts. Each card is an opportunity for you to drive up debt, which, in turn, will drive down your credit rating. Whenever you open a new account, your credit rating will drop. Taking on more credit makes it appear that you are not satisfied with the amount you currently enjoy. Pay off and close out your credit cards one at a time as you can. That includes gas cards and store cards. Keep one card to help you manage your credit rating and be there in case of emergencies. You'll improve your credit score and reduce unnecessary clutter from your life.


Purchase Only What You Can Pay for Each Month

The ideal way to improve your credit rating with a credit card is to make a few purchases with it each month and pay the balance when the bill comes. Buy gasoline with your card, or use it to pay for your daily morning coffee. Since these expenses are already part of your budget, it will be easy to pay the balance on your card every month. After a few months, you should see an improvement in your credit score. If you must accrue interest charges, be sure to pay more than the minimum required payment so the balance will decrease faster.


Keep Track of Your Credit Report

You should review your credit report on a regular basis. You are the only one who can make sure that all information reflected on the report is accurate. A good way to monitor your credit report is to join a credit monitoring company that will alert you if your score changes or if new information is posted to your report. Monitoring your credit report is also a good way to discover if someone has used your name or social security number without your permission. The sooner you find out about potential fraud, the easier it will be to correct your report.


Jessica Bosari is a freelance writer and blogger for various publications and her own blog. You can read more of Jessica's work here. If you have any comments or questions about SavingTools or about saving money, leave your comments in the form below or email Thanks!


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