Tuesday, 8 May 2012

Building A Credit Rating With Your Credit Cards

Using a credit card is probably the simplest and easiest way to build a healthy credit rating. A card comes with many benefits. You are able to make cashless transactions in stores and shops, you are able to shop online and you are able to make online transactions which would otherwise not be possible such as airline ticket booking and making vacation plans. Not to mention the fact that almost all cards give back some sort of reward points for using them. You also often get good deals such as the ability to pay a large transaction with a minimal or 0% interest rate.

However, an ignored aspect of a card is that it helps you build your credit rating. A healthy rating depends upon the positive information that is reported on your credit report. Every time that you use your card and make a payment towards your bill, it is reported to the credit bureau.

The proper way to use your card in order to have the maximum beneficial impact on your rating is to keep the balances low. This is something that is known as the credit utilization ratio and is one of the factors that is taken into consideration by the credit scoring model. If you keep the balance on your credit card below the 30% mark of the credit limit and make sure that you make the payments on time, you will build positive credit history for yourself and for that particular credit account. If you use two or three credit cards, and follow the same principle of keeping the balance below 30% as well as making timely payments then you will have multiple credit accounts on your credit history that will have a positive impact on your credit score.

You may be one of those people who revolve the balances on their card. Revolving a balance means that you do not pay the entire credit card bill in one month but make a partial payment. This will not do your credit rating any harm as long as you pay more than the minimum payment due on the credit card and do not charge it so much the next month that you go over the 30% mark of your credit limit. This does not mean that you can never exceed the 30% of your credit limit but generally speaking try to keep the balances on your card as was possible. At any rate, always avoid maxing out your credit cards.

Also paying off the card in full at the end of the month is a good idea because rotating the balances will cost you extra in terms of finance charges. Never pay less than the minimum amount due on your credit card because that will be constituted as the nonpayment which will be reported to the credit bureaus. A late payment is usually reported to the credit bureau after a period of 60 days. So in case you have forget paying one single credit card bill on time it will probably not get reported. A credit card account is usually reported as delinquent after 180 days of non-payment.

Get more Credit Card Help here.

By Anuje Cross writing for Crediaid.com - A resource for Credit Education and Aid

View the original article here

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