How to Maintain Good Credit with Credit Cards for Good Credit
Credit cards can be a great tool for establishing and maintaining a healthy credit score. And as we know, good credit opens up a wealth of opportunities and options when you're looking for good credit credit cards or credit cards for good credit. But if irresponsibly managed, credit cards can also lead to credit score damage and make it more difficult for you to qualify for favorable terms and conditions on future lines of credit. Therefore, it's important that you follow the basic tenets of good credit management to keep your score strong.
Make Timely Payments
Your payment history makes up the largest percentage of your credit score calculation, so making on-time payments is critical to maintaining a good credit score. When you are frequently late with your payments or miss one altogether, lenders may view it as a sign that you are financially troubled or pose a risk, fears that will be reflected in your credit score. If you have trouble remembering to make payments, consider setting up reminders or alerts before your balance is due.
Avoid Running Up High Balances
When you use a large portion of your available credit limit or max out your card, you are putting your good credit score at risk. The second largest percentage of your credit score calculation is what is known as your credit utilization rate, which is the ratio of your debt balance vs. your available credit line. For example, if your spending limit is $1,000 and you carry a $500 balance, your credit utilization rate is 50 percent. Lenders look more favorably on a lower utilization rate because it shows you are not reliant on credit, so try to use less than 10 percent of your available limit to maintain a healthy score.
Develop A Spending Plan
Having an idea about how you plan to use your credit card is key to helping you manage your account wisely. For example, if you pull out your credit card for every purchase you make without really thinking about it, you run the risk of increasing your balance to unmanageable levels and incurring debt. To avoid this, develop a plan that outlines when you want to use your credit card. For example, you may choose to only use credit for emergencies or for certain purchases, such as gas or groceries. Having some type of plan in place will allow you to better monitor your spending and keep your balances under control.