How to Improve Your Credit Rating With a Credit Card
Having a bad credit rating can have a number of negative consequences for you and make a number of things in life difficult. For instance someone with a bad credit rating is going to struggle to get a loan and that includes a home loan basically making it near impossible for you to get onto the property ladder and start saving your money instead of throwing it at rent every month.
At the same time if you have bad credit you can struggle to afford many other things like a car and even be unable to follow your career goals if you can’t get a business loan. In severe cases you might even struggle finding somewhere to rent if that involves a credit check too – even getting a good mobile contract.
As such then it is highly important to fix your credit rating if it is currently bad, and the good news is that this is actually relatively simple to accomplish. Here we will look at how to improve your credit rating using just a credit card so that you can start investing in properties and generally begin to improve your financial situation.
How it Works
Basically using a credit card can work as a way to improve your credit score because it basically involves taking out and paying off lots of small loans. Each time you buy something on your credit card, that is essentially a loan from the credit card company. Thus it follows as well, that each time you make a credit card repayment, you are also actually paying off that loan. And because it’s small, you can do it completely each time.
This means in other words that every time you make a repayment on your credit card, you are demonstrating too your bank that you are someone who is able to stay true to their financial commitments and you will raise your credit score as a result.
If you want to improve your credit rating then, one of the very best ways is to take out a credit card and then make sure that you pay it off at the end of every month. As long as you don’t get into any other major debt this way you’ll be able to gradually improve your reputation in the eyes of the banks.
Of course you do need to be careful doing this. One thing to bear in mind is that using a credit card only works if you are paying off your loans on time. If you fail to, then you will find you actually get into more debt and damage your credit score further.
The solution really is to only use the credit card for the small purchases that you are confident you can pay off – not to put everything on it and get into worse trouble than you are currently. For instance then you could make a pact with yourself to use your credit card only to pay for your gas every month and then this will mean you continually use it, but that there is never too much to pay off at the end.
Another tip is to shop around for your credit card. You might find you have to settle for a worse APR if you are taking out a new one with bad credit, but make sure you get the best possible deal you can and spend time researching the cards.
Matt M. is a finance expert and has written many articles about managing personal finance to his credit. He has credit score range explained through his posts and is a great source of advice for people with bad credit rating.