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How to Use Credit Cards to Build Your Credit

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Having some sort of credit is necessary for your financial health. Even if you are a young adult and plan on paying cash for everything, you still need to build your credit. It is something that you will need should you want to make a large purchase such as a car or home in the future. Perhaps you are an older adult that is regaining good credit after a financial hardship. Knowing how to use credit cards to build your credit is something that can really help you in the long run.

Let’s look at some tips you should know about credit cards and their usage to build your credit in a healthy manner.

1) Start Small – you do not have to have 3 or 4 cards at one time. Even if you have just one credit card, knowing how to use it properly can do more for your credit that having a wallet full that are used the wrong way.

2) Keep Your Limits Manageable – for your first credit card, you will probably only receive $250 or so to start. That is plenty to start your healthy credit building. As you show the card company that you can manage your credit, they will increase your limit bit by bit.

3) Make Small Purchases to Start – resist the temptation to max out your card with one giant purchase to celebrate getting your credit card. Keep your purchases small to start and keep your balance at or under 30% of your credit limit for the best results at building your credit. Your limit and your amount available to spend is seen as a percentage of available credit and is factored into your overall credit score.

4) Pay Your Card Off Each Month – start your credit history off right by paying off your balance every month in full and on time. Plan your purchases to keep them within the 30% credit limit and write the check to pay it full. Do this for several months to show your ability to pay and make more than the minimum required payment.

5) Plan to Use the Card for Emergencies Only – living off of your credit card is a dangerous habit. Plan to use your card only for emergencies and you will always be in control of your credit. Do make small purchases now and then and pay it off in full immediately to grow your credit worthiness, but keep the card locked away otherwise. Having it for emergencies will mean that when you really have an urgent reason to use it, you will have limit available to use. Make sure to pay it off as soon as possible and know that having a balance for long periods of time can hurt your credit score or slow its growth.

You can rebuild your credit or start from zero building a healthy credit score by using credit cards in the right manner. By using these tips, your good credit score will serve your financial needs for a long time to come.

Image courtesy of Lotushead and freeimages.com

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