Don’t Overspend

A credit card makes it easy to spend more than you normally would. It may seem obvious, but a credit card does not provide you with free money. You have to pay back what you spend often with INTEREST. If you fail to pay back your debt, your credit score will fall, and it will be very difficult to get a loan for other major life events such as buying your first home.

Keep Your Utilization Low

Number two on our master list of credit card tips is to keep your credit utilization low. One of the biggest factors that determines your credit score is credit utilization. Though you have a credit card limit, you should not be reaching it every month. Launch CU recommends you keep your credit utilization at or below 30%. For instance, if you have a credit card with a $3,000 limit, you should try to keep your balance at or below $900. If you have multiple credit cards, your credit utilization takes all of your accounts into consideration. Thus, credit utilization is calculated using this equation, (total balances/total limits). For instance, if you have three credit cards, each with a $3,000 limit, and $800 balances, your credit utilization would be 26.6%.

Here’s the math:

• • $3,000×3=$9,000 total limit
  • $800×3=$2,400 total balances
  • Credit utilization= $2,400/$9,000=26%

Keeping your credit utilization low will help you keep your spending under control, and result in your credit score moving in the right direction.

Limit The Number Of Accounts You Open

It may be tempting to apply for multiple credit cards in a short period to take advantage of exclusive offers, especially during the holidays; however, opening numerous accounts at once can negatively influence your credit score. Each time you apply for a new credit card the creditor conducts a “hard pull” on your credit to determine your eligibility for approval. Having multiple inquiries in a short period could cause your credit score to go down. In addition, every time you open a new account, your length of credit history decreases, which could also cause your credit score to drop.

Make All Of Your Payments On Time

Payment history is the number one factor in determining your credit score, so it is essential to always make your payments on time. If you have trouble remembering to pay your bills, consider setting up automatic payments on your credit card. That way you know you will never be late or miss a payment.

Keep Unused Accounts Open

If you have a credit card that you never use, it may be tempting to close it to free up space in your wallet; however, doing so could negatively affect your credit score. Closing out an old account would result in lowering your overall available credit, and thus could increase your credit utilization. In addition, closing out an old account would also reduce your length of credit history, which could cause your credit score to drop.

Try To Pay Your Balance Off In Full

If possible, try to pay your balance off in full every month to avoid costly interest charges. It may not always be possible to pay off your entire balance, but paying off as much as possible will help you save money on credit card interest.

Check Your Credit Score

Most responsible credit card users make it a habit to check their credit report at least twice per year. Checking your credit report will help you find any potential errors that could bring down your credit score and can help you uncover potential fraud. You can check your score on annualcreditreport.com.