LEARN HOW TO USE CREDIT CARDS RESPONSIBLY

USING A CREDIT CARD IS A PRIVILEGE

AND NOT A RIGHT.

CREDIT CARDS ARE A SERIOUS FINANCIAL

TOOLS AND THERE IS NO REASON A BANK IS

OBLIGATED TO APPROVE YOU FOR A CREDIT CARD.

 1. Learn your FICO Score--- When you apply for a

mortgage

or a loan, your Fico Score determines what

interest rate

you’ll pay. (FICO is short for “Fair Isaac Corporation.”)

This score is calculated by assessing several

aspects of your

payment history and credit account balances.

2. Don’t close all of your accounts---Closing your

credit card accounts isn’t always the smartest

move for your credit.

Remember, you are rewarded for credit

that’s available

to you that you are not using. A good

way is to learn

how to keep credit accounts open

without overspending.


3. Use your credit cards periodically for small purchases--Some credit card companies close accounts

that have been inactive for a certain period

of time. Set a low dollar limit and use your

active cards from time to time.


4. Use reward cards---offer rebates on purchases,

which can help you save on those periodic

expenses you’re charging.

5. Don’t carry a balance--- Pay off your cards

in full each month. Or you can pay more than

the minimum you owe.


6. Request a higher credit limit--- If you’ve been

making timely payments, you may have to ask

your credit card issuer to receive an automatic

increase, which can help improve your

debt-to-available-credit ratio.


7. Only spend what you can afford--Don't spend

more on a credit card than you can afford to pay

in full when the bill is due.


8.  Always pay all your bills on time---Late payments

or accounts that go to collections are a bad sign to Lenders.

9.  Keep debt low relative to your credit limits---Maxing out credit cards is a bad sign. Paying down loans

or paying them off is generally seen as a good thing.


10. Don't apply for lots of new credit in a short amount of time---Lenders may think you are a greater risk if you apply for 6 or more cards a year


If you do not use a credit card properly it can leave you with a surprising amount of large debt which can cause you a very long-lasting damage to your financial health

If you use them responsibly, it can help you build great credit and save you money

To understand how to use credit cards responsibly, you will first have to understand how credit history works

The higher your score the more trustworthy you seem to banks, lenders,landlords and employers.

WHAT IS THE CREDIT SCORE RANGE CREDIT  BUREAUS USE?

  • EXCELLENT   750 & ABOVE

  • GOOD            700-749

  • FAIR-             650-699

  • POOR-        550-649

  • BAD             550 & BELOW

Understand How Credit History Works

Based on your credit history, a Lender may decide whether they want to do business with you and on what terms

Your credit history can affect your ability to

get approved for a credit card

get approved for a mortgage or auto loan

get a cell phone

find a job get insurance coverage

find employment rent a home or apartment

connect utilities in your home

The sooner you start building credit the better.

Lenders send information about your financial behaviour to credit bureaus. The credit bureaus store this information and use it to create your credit reports.

Consumers with excellent credit score will likely have no or very few late payments in their credit report, will regularly pay off their balances in full, and will have a low credit utilization across all their lines of credit.

Consumers with a good credit score in this range still enjoy some of the best financial products and interest rates available. This credit score means you are generally financially responsible: Canadians who sit in this credit score range make most of their payments on time with only the occasional late payment on rare occasions.

 Consumers with fair credit score will certainly experience higher interest rates from lenders. Those on the mid to lower end probably have been late on their payments multiple times to more than one lender and may have defaulted on a loan at some point. 

Consumers with below average credit will face higher interest rates for the lines of credit they are approved for, which is costly over time.They also are not eligible for the more lucrative credit cards that provide accelerated levels of cash back and rewards

Consumers with poor credit score unfortunately have a significantly damaged credit history. Perhaps you have defaulted on multiple loans, your debt is very close to your credit limit, or you have declared bankruptcy, which will be on your credit report for at least seven years. In this range you will have a difficult time obtaining credit or getting approved for a loan.


EXCELLENT TIPS TO REMEMBER

Borrowing and repaying your credit card bill on time, in addition to not carrying a large balance is one of the most important things you can do to build up a great credit score.

The card companies report your payment behaviour to the credit bureaus.
Keeping an overall low credit utilization  is key to keeping a high credit score. 

However having at least one account with a high balance can hurt your score even if your overall utilization is low.

Make sure your score wont suffer by spreading out a low utilization across all your accounts.


DID YOU CHECK YOUR CREDIT SCORE TODAY?

Understand How Credit Cards Work

A credit card is like an instant loan. When you make a purchase with a card, the credit card company will pay for the purchase on your behalf. Likewise they expect that you will pay them back for the loan in the future.

The maximum your credit card issuer will let you borrow at one time is determined by the credit limit on your account

If payment of credit card is not done soon enough , interest gets charged on the amount owed.

Interest is a fee you pay for borrowing money

Your credit score is based on information in your credit report

PAYMENT HISTORY--35%

Making payments on time is the most important aspect of a credit score.  

Your credit history should show no recent late payments if you want to push your score into the excellent range 

 Negative information can stay on your credit report for seven years, though the older the information, the less of an impact. 

CREDIT UTILIZATION--30%

The amount of credit you are using.is the next greatest factor in your credit score and should be under 30 percent of your available credit limit. The lower the better

Lenders look at the total amount that you owe on each of your accounts compared to your credit limit, and the total that you owe overall compared to your overall credit limit.  

LENGTH OF CREDIT HISTORY--15%

 To achieve an excellent score, you need to be especially careful about shutting down long-standing accounts, and you shouldn’t open too many new accounts at once, since this can drag down the average age of your accounts.

TYPES OF CREDIT--10%

Different types of accounts under your name known as "credit mix" includes revolving credit, such as credit cards, and installment loans such as mortgages. 

To get your score into the excellent range, you should make sure you have multiple types of credit in your credit history.

RECENT CREDIT INQUIRIES--10%

  Be careful about applying for new credit cards. Make sure you can qualify before you apply and try not to apply for a lot of cards all at once, as this can cause your score to drop. 

This is often referred to as HARD INQUIRIES

THE IMPACT OF YOUR CREDIT SCORE

Getting a credit card ---A good credit score gives you access to premium cards with generous rewards and exclusive perks. And the higher your score gets, the more competitive your credit card options become.

Qualifying for a loan---A good credit score helps you qualify for the lowest interest rates on personal loans and car loans—

Renting a home---A good credit score improves the chances of your rental application being accepted. 

Buying a home-A good credit score can help you get a lower mortgage rate from a major bank or other lender. The best rates are usually reserved for consumers with good credit scores, but you can also negotiate a cheaper mortgage. Remember: a high score shows that you’re a low-risk borrower.

What Is a Credit Limit  and How Does It Affect Your Credit Scores?


While a Credit Card offers you the ability to borrow with flexibility, certain restrictions apply to your account which is known as your credit limit.

A credit limit is the maximum amount of money which a lender or credit card issuer will allow you to borrow on your account

This is how the process works

Credit Limit on the card---$10000

Total Monthly Charges---$10000

Updated Available Credit---$0

Credit Card Payment---$5000

Updated available credit for new charges---$5000

So in this example you have a credit line of $10000 and you use the whole thing up by making purchases. Then you make a payment for half the balance, which leaves you with half of your total credit limit available for new purchases

TIP OF THE DAY

Paying your full credit card balance off each month doesn't just free up your credit line. 

its also a smart move for you to get a very high credit score which can also help you to save a lot of money on expensive interest rates

We want to hear from you

EXPERIENCE

Do you Have a credit-related question that we didn’t answer in this guide? 

Send us an Email and we will do our best to answer any inquiry you might have about credit scores, reports, ratings, and more.


STRATEGY

HOW DID I BUILD MY CREDIT SCORE FROM 500 TO 850

WHAT FACTORS INFLUENCE CREDIT CARD THE MOST?

HOW DO YOU INCREASE YOUR CREDIT SCORE ?



SUCCESS

I  built my credit score from 500 to 850.

It took me one year to work on it.

I followed the same procedure every month.



VantageScore scoring criteria

Payment History (Extremely Influential)

Credit Utilization (highly influential)

Length of Credit History and Type of Credit (HIGHLY INFLUENTIAL)

Total debt owed (moderately influential)

Recent credit inquiries (less influential)

Available credit (less influential)

WHAT DETERMINES AN EXCELLENT CREDIT SCORE?

The FIVE FICO scoring criteria           

Payment history (35%)

Credit utilization and total debt owed (30%)

Length of credit history (15%)

Type of credit (10%)

New credit accounts and recent credit inquiries (10%)

 TYPES OF ACCOUNTS WHICH HAVE CREDIT LIMITS

Credit Cards

Retail credit cards(Gas Cards and Department Store Cards)

Home Equity Lines of Credit(HELOC)

Business lines of credit

 

TRANSUNION

 

EQUIFAX

 

 

CREDIT KARMA

 

CREDIT SESAME

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