CARD SHARK: Why your credit cards can help your credit score

Posted By: Matt in Credit on 05/09/2014 at 09:21:16

When it comes to helping your credit score, credit cards get a bad rap.

No one is going to argue with a few key negative points when it comes to credit cards.

You shouldn't overuse them to the point where the balance matches your credit limit (or at least is close to the same number).

You definitely don't want to carry too much debt as it relates to income.

And if you're using your credit cards to buy gum, that should stop immediately.

But credit cards aren't all bad, especially if you know how to use them. Showing banks and financial institutions that you can be trusted with their money as far as how to spend wisely and pay it back accordingly can raise your credit score in a hurry.

That's just one way credit cards are hoping to clear their name and, subsequently, get your back on financial track when it comes to raising your credit score. More often than not, however, when the consumer gets into any kind of financial trouble, they immediately start canceling cards or applying for new ones in the hopes that a balance transfer can buy them some more time or make their payments lower.

Both of those ideas aren't good ones.

Opening up too much credit or canceling credit cards with zero balances actually can have the reverse effect you're looking for as far as increasing your financial portfolio. If you're really interested in making credit cards work for you, keep your balances low, and you absolutely must pay your bill on time.

Of course, there are rules to the number of cards you should have or at least decide to open on a whim. Your credit score takes a bit of a hit every time you open a card, so you must resist the marketing ploys of your local department store or even the heavy hitters in the credit game.

The clothing stores are especially tough to ignore, since most of them are tied to some sort of a discount once you open the card account. Ten percent off your first purchase or promises of 50% coupons headed to your email shouldn't influence your decision to pass on opening one card after another every time you buy a pair of pants or a new shirt.

When used correctly, credit cards can easily rank as your best friend. Otherwise, you'll be wishing you never bothered to open one in the first place.

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