There are many misconceptions when it comes to credit cards. Many people believe that using a credit card is a sign that you can’t handle money. Others even advocate ditching credit cards altogether. These 17 credit card tips will show you how to use them to boost your credit easily towards that magic number of 850.
1. Keep Utilization Low
When you use your credit card, the percentage of your total credit limit is your credit utilization. For example, with a limit of $1,000, if you spend $500, your utilization is 50%.
Credit bureaus will lower your credit score if they see your credit utilization above 30%. This is just a worst-case scenario. Ideally, keeping your credit utilization below 10% is ideal. This will substantially boost your credit instead of keeping it where it is.
Your credit utilization is only reported once per month. You can find this specific day through your credit card company’s website. If you don’t know this day, keeping your utilization as low as possible at all times is the best option.
Even if you keep a low utilization, it’s still important to pay it off completely. Carrying any amount of debt is bad, even if it’s a small amount.
2. Pay Credit Cards Off Weekly
This is, in my opinion, the easiest and most often ignored method to build credit using credit cards.
There is no restriction to how often you can pay off your credit cards. The standard method may be monthly, but this isn’t required.
As mentioned, credit card companies report your credit utilization once per month. We want the utilization on that day to be as low as possible. If you only pay off your credit cards monthly, then you will only be able to use a very small portion of your credit card for the whole month. With a low credit limit, that is extremely limiting.
The way around this is to pay your credit cards off more often, ideally weekly. This way, you could use 10% of your credit card each week, pay it off at the end of the week, and reset your utilization for next week.
With this method, the max credit utilization that will ever be reported will be 10%. When a bureau sees these low usages for a few months in a row, they will almost certainly boost your credit. You will look like someone very trustworthy with loans.
3. Use Credit Cards Regularly
When trying to build credit, it may be tempting not to use credit cards to show credit bureaus that you don’t rely on them. However, this has the opposite effect.
Credit bureaus want to see that you are using some of your available credit and have the ability to pay it off. This helps demonstrate an ability to manage money and pay off your debts. The more they see you pay with your credit card and quickly pay it off, the better.
In general, use your credit cards everywhere possible. Not only will this help build your credit, but they are also more secure than debit cards.
4. Pay Off Credit Cards Completely
There is a very common myth that carrying some credit will help you. This is absolutely not true. Credit bureaus will see this as a sign that you are using more of your credit than you can afford to cover.
At the very minimum, pay off your credit cards completely by their due date every month. Credit bureaus will see this as a sign that you can be trusted to pay off any debt that you take on.
5. Prioritize Paying Off Debt
Though it’s important to use your credit cards, if you have any credit card debt, that must be prioritized. Carrying debt will hurt you more than utilizing your credit card will help you.
Credit card debt is one of America’s most common forms of debt. The average American has ~$5,800 in credit card debt. That is a huge burden to carry with you and makes it much more difficult to achieve the life you want.
Carrying credit card debt hurts in two ways. For one, credit bureaus see it as a massive negative. Carrying debt makes credit bureaus feel that you can’t be trusted to pay off your credit cards. Thus, they will lower your score so that less credit is offered to you in the future.
Second, credit card debt has some of the highest interest rates of any payment. Most interest rates are 3-10%. Credit card interest rates are very commonly as high as 25% annually, and this compounds daily. So, every day that you leave credit card debt unpaid, you are incurring a substantial amount of additional debt, making it even harder to pay off.
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6. Ask for a Credit Limit Increase
This may seem counterintuitive. The goal is to spend less on your credit card, so why get a higher limit? The reason is the previously-discussed credit utilization. What really matters is the percentage of your limit you spend, not the dollar amount.
Let’s say you put $500 on your credit card each month. If your credit limit is only $1,000, you have a 50% credit utilization. However, if you get a limit increase to $2,000, your credit utilization drops all the way to 25%.
A higher credit limit is by no means a reason to spend more money. Instead, a limit increase is an opportunity to spend the same amount as before and have it result in a lower utilization.
Most credit card companies accept line increase requests without doing a hard credit pull. Contact your credit card company prior to requesting one to make sure this is the case. If not, the cons of a hard credit pull may outweigh the positives of a higher limit.
The rule of thumb is you can request an increase annually, assuming you have paid off your card in full and on time for that entire year. On the other hand, credit card companies will also raise your limit themselves without you asking. They hope that by raising your limit, you will spend more, incur more debt, and they will make more money.
7. Check Your Credit Report Often
A credit report shows you your open lines of credit, average utilization, approximate score, and any other notifications related to your history. These reports are invaluable to understanding where you’re at and how to improve your score.
The other valuable part of credit reports is checking for errors. If anyone opens a fraudulent line of credit under your name or there is an error when filing credit activity, they will show up on your report. You can then contact the bureau that furnished the report and advise them that it needs to be corrected. This can protect you from years or decades of damaged credit due to a horrible person.
There are many sites online that scam users by offering to check your credit score for free. Only ever check a credit report from your credit card company or one of the large credit bureaus like Transunion or Experian. That is the best way to get it done safely and for free.
8. Ask to Have Paid-Off Debts Removed from Your History
If you struggled to pay off debt in the past, this will hurt your credit for years to come. However, if you have since paid off that debt in full, you can request to have this negative history removed.
This is best done through a collection agency or the original creditor. In general, you will likely have better luck talking to a collection agency since they didn’t give you the loan in the first place.
Regardless, having previous negative credit factors removed is extremely powerful. This can help boost your credit past what you can do simply by making positive moves today. This, in combination with proper debt management, can get you out of even a bad credit hole.
9. Set Up Automatic Payments
Automation is a huge time and money saver. You don’t have to spend the time to make payments manually, and you never forget a payment because it’s not on you to remember. This is true for anything from credit card payments to stock market investing.
For most credit card companies, this is extremely simple. Just set it to pay off your balance on whatever interval you’d like, and be done with it. This is a simple but powerful tip.
10. Have Four Lines of Credit
Credit bureaus want to see that you are able to manage multiple streams of credit. The magic number for this is three or four lines, with most experts saying four.
A line of credit could be a credit card, a mortgage, a car loan, or any other form of debt. Credit cards are by far the easiest and safest form of debt to take on and not pay any interest.
These lines of credit include unused ones. If you have an old credit card you haven’t used for years, that still counts. At the very least it’s working to keep your average credit line age higher, which helps your credit. It would help your credit the most to consistently use it, but having it active but unused is better than nothing.
If you are below the magic number of four lines, open a credit card or two to get there. Even if opening them harms your credit in the short term, it will be made up for in no more than a year or two.
11. Don’t Open Too Many Credit Cards at Once
If you are looking to open a credit card or two due to that last tip, don’t do them too close together.
One of the primary metrics that affects your credit score is hard credit pulls. This is where a company requests that a bureau do a deeper dive than normal into an individual’s history to get the most accurate credit score. This negatively affects your credit in the short term since it indicates you are looking to take on more debt.
If this is just one card, it’s not much of a problem. The card will help boost your credit back up soon enough. But if more than one of these hard pulls are done in a year, it can significantly impact your credit.
Instead of opening multiple lines of credit or any other form of debt at once, space them out by at least a year. This will allow you to obtain the lines of credit you need without harming you as much.
12. Utilize a Secured Credit Card
Most credit cards use your credit to obtain permission to take out debt, and you use that debt to pay for things until you pay it off when it’s due. This requires a good credit score to get a high limit or even be approved at all.
The other option is a secured card. This is a card that you open by depositing funds as collateral for your limit. For example, depositing $750 into a secured card gets you a limit of $750. This has a lot of advantages for young people or people with poor credit.
- You don’t need as high of a credit score to get approved
- You can set your own credit limit
- Your credit takes little to no hit during the approval process
- Your credit score increases as you use it, though not as much as with a normal card
- After consistently using it and paying it off, you can be upgraded to an unsecured card after around 6-12 months, depending on the company
Think of a secured card as an accessible introduction into credit cards. One that is very easy to transition into a standard card after a while.
13. Hold On to Lines of Credit
One of the many factors that affect your credit score is the average age of your lines of credit. If you just opened your first line last month, credit bureaus have no assurance that you can be trusted. However, if you have been properly using credit for 20 years now, the bureau will feel very comfortable giving you a higher score.
Even if older lines of credit are unused, they are valuable. At the very least, it increases the average age of your lines of credit.
14. Utilize Credit Card Rewards
Many credit cards offer fantastic rewards like cash back and sign-on bonuses. These bonuses are free money, assuming you were going to spend the required money regardless. There is no reason to pay with a debit card when you could get a small reward for using a credit card instead.
How this helps your credit is you can use these bonuses to pay off debt. If you have credit card debt or any other form of debt, don’t have more than four lines of credit, and haven’t had a hard credit pull recently, sign up for a new credit card. You can use the sign-on bonus to help pay off your debt more quickly.
The more quickly you pay off your debt, the faster your credit score will increase. These rewards are one of the ways you can take advantage of the credit card system. Just make sure to always pay it off in full and hold on to the new card for a long time. Don’t just take the rewards and leave.
15. Use Your Credit Card for Recurring Bills
It was mentioned above that regular use of your credit card is integral to building your credit. One of the easiest ways to do this is to use your credit cards to pay recurring bills. This guarantees that you will have regular payments on your card even if you use it for nothing else.
As long as you keep your utilization below 10% at all times, bills like streaming services, utilities, and delivery services can be easy ways to use your credit card. Plus, setting this payments as automatic ensures you won’t forget to pay any of them on time.
16. Boost Your Credit Score (Safely)
There are millions of scammers looking to fool people into thinking they will boost their credit scores while instead stealing the user’s information and leaving. This tip is only applicable to large, reputable credit agencies.
There are tools out there to boost your credit score by taking into account recurring payments not included in your standard credit score. One of these is Experian Boost (LINK https://www.experian.com/consumer-products/score-boost.html?pc=sem_exp_google&cc=sem_exp_google_ad_1651407997_65972645920_459274193706_kwd-585063777506_e___k_CjwKCAiA0JKfBhBIEiwAPhZXD4al32VN5rFVgjJBoBAneSHsg6if6xOiX_G1ehHHANR0umLGEOuAmRoCyyIQAvD_BwE_k_&ref=brand&awsearchcpc=1&gclid=CjwKCAiA0JKfBhBIEiwAPhZXD4al32VN5rFVgjJBoBAneSHsg6if6xOiX_G1ehHHANR0umLGEOuAmRoCyyIQAvD_BwE). This is a free service that will help boost your credit by proving you are reliable at paying bills.
There are other offerings from other credit bureaus that perform a similar function. Experian Boost is the most widely used and supported.
17. Limit Hard Credit Pulls
When you check your credit score, that is usually a soft pull that doesn’t affect your credit score. However, applying for a new line of credit will call for a more accurate hard pull that will affect your credit score. These need to be limited as much as possible.
These hard pulls are worth it when opening a new card to fill out the optimal four lines of credit, but not for any other reason. Many people mistakenly apply for loans when shopping for cars over an extended period of time not knowing they are hurting their credit.
The only exception to this is pulling multiple times in quick succession for an auto or home loan. In general, bureaus will see this as you shopping for the best rate, and forgive it. Assuming it’s only three or four credit pulls. But if you are requesting hard pulls on your credit once a month for a year, your credit score will drop dramatically.
Closing Thoughts
Raising your credit score using a credit card is a viable, powerful way to boost your credit. Utilize these 17 tips to get that credit score you want as soon as possible.
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