Before you move on to signing yet another credit card application, you should know how opening a brand new credit card account can positively affect your credit score. When you know the impact of opening a new card, this can keep you from handling it in a wrong manner which can later on tarnish your credit score. Your credit score is a 3-digit number which is decided by several factors and hence it can be tough for you to know where to start if you’re concerned about rebuilding your credit score. Hence, it is said that the easiest way of improving your score is by opening a new credit card account and using it responsibly and regularly for good. Here are few tips you may follow to improve your score.
Pay back the amount in full and on time
In order to have a good credit score, the foremost thing that you need is a record of timely debt payments. In case you’re someone who never had to make any such debt payments, you’ll probably not have good credit score or rather no credit score at all. If you don’t have the burden of making loan payments, you can depend on your credit card to make regular expenses as this will allow you to establish credit without having to fall into debt. You just have to follow the simple strategy of paying back your credit card amount in full and on the right date on which it is due. When you pay back in full, you don’t have to pay the interest rates. Remember that your payment history constitutes 35% of your FICO score.
Treat your credit card like a debit card
One of the biggest dangers of using a credit card is that the balance in your account doesn’t change when you buy something. Only when you pay off the outstanding bill, the money is debited from your account. In case you lose track of your expenses, you will start incurring a huge amount of money. This is why you need to maintain a budget, irrespective of whether you’re using credit cards or not. Treat the credit card like you would treat a debit card, spending only the amount that you can pay back in full. There’s no point in carrying a balance from one month to another.
Maintain a low balance
The second most vital factor in your FICO score is also the amount which you owe as this account for 30% of your credit score. FICO will always take into account your credit utilization rate or the amount which you owe on your card as a percentage of the credit that is available to you. The higher is the utilization ratio, the higher will be the chances of making missed payments. So you have to try your best to keep your credit utilization rate at a low level in order to improve your credit score.
So, now that you know how a new card can improve your credit score, make sure you start following the advice given above. Boost your score and open up opportunities of obtaining new lines of credit at a reasonable cost.
