I’m trying to qualify for a mortgage for my first home. I know having a credit card is good for your credit rating but I don’t know what I should be doing or not doing in order to improve my score. Can you please give me some tips and point me in the right direction?
3 Pillars Of Credit Card Success
It takes six months to establish good credit and keeping in the good graces of your credit card company isn’t as hard as you might think. The following tips are what I think of as the 3 Pillars Of Credit Card Success. Once you have them in place, they will help to uphold your credit score and build your credit history.
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PILLAR #1: Pay your bill on time
Most credit card companies offer three ways to pay: through the mail, online, or by telephone. Many offer ways to set up automatic online payments. While regular mail helps to avoid fees sometimes associated with instant payments and phone transfers, if the bill is due today, by all means pay the fee and get the bill paid. It will save you the penalties and late fees associated with missed payments, all of which can have a negative impact on your credit score.
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PILLAR #2: Never exceed your credit limit
For a first-time applicant, credit limits start out small, anywhere between $150 – $500. It might make sense to have two credit cards: one that is kept for emergency use only, and one that is used and paid off regularly in order to begin building good credit and improving your credit score.
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PILLAR #3: Keep your usage limit under 35%
This is a great rule of thumb for anybody: you want to stay below your credit line, never charging more than 35 percent of your credit limit. For example, with a $500 credit limit, your total monthly charges should not exceed $175. If you need to carry a balance, your credit score would benefit from dividing the amount on 2 cards so the usage limit stays under 35 percent. Remember, a credit card is a financial tool that is neither good nor bad on its own. It’s what you do with it and how you use it that determines whether or not it will be helpful to you.
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Bottom line: To improve your credit score, pay your bills on time, never exceed your credit limit and keep your charges 35 percent below your usage limit.
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