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Thank you for such a great response to last week’s new personal finance series! It's obvious that it’s an area of interest and concern for all of you!  We plan on addressing the areas of taxes, insurance, mortgages and financial planning with posts in the near future, but today let’s talk about using Credit Cards to your advantage!   When you use them correctly, nothing can improve your credit scores more effectively; but, use them incorrectly, and they are trouble with a capital T.

So, how do use Credit Cards correctly?

  • Use them every month or two. Don't cut them up, don't freeze them in ice and don't close the account. 🙂  Your credit score is made up of different categories, including your payment history and how long you’ve had open accounts. When you close your credit card account, your score could be affected by 35% in the payment history category and 10% in the length of credit category.
  • Don't carry a balance. Ever. Use the cards for something simple, a tank of gas or a dinner out, something you were going to pay cash for anyway. Once you get home, send the payment in and pay off the entire balance each month.
  • If you can't pay them off each month, always try to be below 10% of your credit limit; 30% in an absolute emergency. If you're looking to make a major purchase, though, don't carry ANY balance.
  • Don't load up one card and leave the others empty, spread the balance around; again, only if you absolutely must carry a balance.

As with any tool, there is a right and wrong way to use it. Think about how you are using your credit cards, don't let this effective tool slip out of your hands and land on your toe; it really hurts and takes a long time to heal.  Remember, this is advice to use credit cards to help improve your credit score.   If you don’t have the willpower to pay it off each month, then you are better off to not use them!

Rich, Ray and Dan are the guys behind Credit Rating University and they are passionate about helping people with all aspects of their financial lives!  Right now, they are offering their Credit Rating Success Kit for only $9.95 when you enter Krazy3223 at checkout!   As always, if you would like a specific question answered by our experts, leave a comment and they will try to address it!