Credit cards are among the best ways to build credit and improve your credit scores by displaying how you successfully manage credit in your daily life. If you are keen to build your credit score, then you should use credit cards regularly. Of course, you need to make all payments on time and ensure that you use only a small percentage of the available credit limit.

The Different Ways to Build Credit with a Credit Card

Credit cards help you to build your credit as all credit card issues report your account to the credit bureau. This information is then used by the bureau to make a credit report that reflects the individual’s credit score. To start building up good credit, you must get your credit card. Getting a card of yours can be difficult at first if you never had one, but one can always go for secured credit cards. Now that you have one, here are the different ways to use credit cards to build a good credit score.

Pay on time and in full

One should make a habit of paying off at least 70% of the due and on time each month as the card issuer will report all payments to the credit bureau. If you can, then it is good to pay off your credit card due in full. When you pay in full, you do not have to pay any interest amount. It is estimated that payment history makes up at least 35% of your credit score, so when you pay on time and in full, you naturally build a good credit score.

Avoid getting too many credit cards

It can be tempting to sign up for multiple credit cards as they always tempt you with offers and in-store discounts. There is no harm in opening up more than one credit card account, but managing multiple accounts can be a real bane. It will tempt you to buy things that you actually cannot afford, and your debt will increase. Eventually, the rising credit card balances will hurt your credit score, and it will be difficult for you to pay multiple bills in a month.

Maintain a low rate of utilization

The available credit card balance is also a significant factor in determining your credit card score. The credit scoring models typically take into consideration the credit limit and the available balance to calculate the credit utilization score. Low utilization is always helpful in building your credit. There is no perfect utilization rate, but we should keep it below 10% to get the best credit score.

Treat it like a debit card

The potential danger of credit cards is that your account balance does not change when you make purchases. Only when you pay the credit card bill will you notice the money going out of your account. So if you are not careful about spending, then you might lose track of your expenses. Always treat your credit card like a debit card so that you spend only that amount you can pay in full when the bill comes.

Using the credit cards to build a credit score is like using a double-edged sword. If you use it well, you can boost your credit score and unlock more doors for you. So always be honest and responsibly use all your credit cards.