Credit Cards Can Help Increase Credit Scores

Credit Cards Can Help Increase Credit Scores

Credit experts are in agreement on one thing – credit scores are extremely important. After all, scores let lenders know just how creditworthy a person is. Landlords will use it to find out if a person will pay their rent and employers could use it to determine a person’s reliability.

People use their credit cards all the time. And, Lutheran Social Services Financial Counseling Services Program Director Darryl Dalheimer said: using a credit card is important to their credit score. He said the formula is to attain a credit card and using it in a smart way.

The FICO score looks at five parts:

  • Payment History – 35%
  • Amount Owed – 30%
  • Credit History Length – 15%
  • New Credit – 10%
  • Credit Mix – 10%

Dalheimer said FICO’s use of the five factors can build people’s credit score and add points. He said two of them are huge – paying on time and using less than the total credit limit. Dalheimer said opening a new card or closing one is a minor blimp on credit scores. What’s most important, he said, is paying bills promptly and using 30% or less of the total credit limit.

Dalheimer said on a $10,000 card limit, people don’t want to put more than $3,000 on the card. If a person has a $500 credit limit, they don’t want to exceed $150.

People are encouraged not to max out their cards, even if it’s to attain points or miles

Dalheimer said credit card lenders want to see people treading carefully with their credit. He said anybody who wants to build their credit can apply for a no annual fee credit card. Dalheimer said three or four cards is fine, but no more than 10.

The best thing a person can do is to use a credit card way under the limit and pay it off each month.

Dalheimer said consumers can freely check their score one time a year.

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