While some may spend much of their life involved in the world of credit – using credit cards for purchases, making payments on auto loans, or even coping with the challenges of student loan debt – a few manage to slip entirely under the credit radar.
If you are a recently widowed spouse, a stay-at-home dad or mom who’s been out of the workplace, or someone who pays cash for everything, it’s sometimes a shock to discover that your absence from the credit universe means your credit score may need some improvement.
Years of credit inactivity can mean low credit scores, which makes it difficult for you to qualify for a mortgage, a car loan, or even a rate on a much-needed new credit card. And this may have you searching for help rebuilding your credit.
For those re-entering the credit world, the best advice is to take a slow and careful approach, which often involves using only one credit card. Credit bureaus, which monitor your credit use and history to determine your credit score, look for your ability to effectively handle credit and pay bills on time.
A new card provides you the opportunity to demonstrate that you can make positive credit decisions. And while opening a credit card may initially drop your score slightly – any “hard inquiries” into your credit record by a bank or department store card will initially impact your score – by establishing a track record of on-time payments and intelligent usage, you’ll be on your way to boosting your overall score.
Utilization is a major factor, making up more than 30 percent of your overall credit score. Using more than 30 percent of your available credit – not just on your new card, but of your entire credit resources as well – can be seen as a negative factor when credit agencies examine your creditworthiness.
Use Your Credit Card to Build Your Credit
So go slow. Use your card to buy groceries, pay for gas, or any of the day-to-day necessities you’d be purchasing anyway, and then pay the bill on time, every time.
Paying off the entire monthly balance may also prove to be a winning strategy for being reintroduced to credit. Carrying a balance of revolving debt will certainly demonstrate your credit activity, but for those looking for better results, paying off the monthly balance will be more beneficial.
Learn to use the card in a consistent fashion and, in time, the results will begin to show on your credit report. Don’t expect it to happen overnight – sometimes, six or more months of steady payments are what it takes to start showing positive increases. Work at them, however, and your credit rating can begin to blossom.
If you’d like some professional suggestions on the best ways to help improve your credit, we are available to provide those answers.