The following article is a guest post on behalf of moneysupermarket.com
Good credit can be difficult to obtain, especially if you do not have a degree in finance and have no idea what kind of things can affect your credit score. Many people who end up with a bad credit score have no idea how it happened. Having a bad credit score can negatively affect many areas of your life, so it is important to be aware of little things that can lower your credit rating without your knowledge.
What about Credit Cards?
Over the past decade or so, credit cards have developed a somewhat negative connotation in our society for various reasons. When people hear “credit cards” they think of those little plastic cards that enable people to spend more than they have, which causes them to go into greater and greater debt from which they cannot escape. Yes, credit cards can provide a gateway for people to fall into debt. But the fact is that if you want a good credit rating, you must own a couple of credit cards.
Owning a credit card for a long period of time is one of the fastest, easiest ways to increase your credit score. In fact, there are even credit cards for bad credit. The sole purpose of these cards is to help you improve your credit rating so that you can eventually get a better credit card. The best thing you can do to improve your credit is to apply for a small credit card, use it to pay for a $50 expense and slowly pay it off over time. Always keep a low balance and never miss a payment.
This advice even goes for those who have a high balance and have been dealing with credit card debt for a long time, which might seem counter-intuitive since the credit card debt caused a low rating in the first place. If you have been working overtime for the past ten years just to pay off a credit card, it is a mistake to cancel the card as soon as the balance hits zero.
Having a credit card in your name that you have had for a long time is a great way to improve your score. Having a low balance on your card that you make payments on every single month will help your rating even more. If possible, avoid lowering your balance to zero at all. Try to keep your balance at 35% of your limit or lower, but do not let the balance get down to zero. However, it is definitely not in your best interest to go out and apply for credit cards left and right. Each time an inquiry is put through to the credit report, your credit score will drop by a few points. It is better to acquire a small number of credit cards over a long period of time instead. If your credit card applications are denied, consider applying for credit cards for bad credit until you get back on your feet.
