Commentary

May 10, 2013

Leveraging credit cards to strengthen your credit score

A strong credit score can be an integral part of staying financially secure, whatever the economic climate. But for many U.S. servicemembers, determining exactly what has an impact on their score can be a daunting task.

One thing is for sure: credit cards can and do impact your credit score – positively or negatively – depending upon how you use them. In fact, credit cards can be one of your best friends or your worst enemies when it comes to your score.

So, how can you make your plastic work for you in the quest for strong credit?

Below are some tips on how to use your cards to strengthen or maintain your credit and avoid some pitfalls that may lower your score in a hurry.

 

Manage your debt to credit ratio: Closely watch your credit card balance relative to your credit limit, called your “debt to credit ratio.” Experts differ about the ideal ratio, but all agree that keeping your debt below 30 percent of your available credit line is key to ensuring your credit score isn’t negatively impacted. Check your statement regularly to make sure that your credit line hasn’t been reduced by your card company, thus raising your debt to credit ratio.

 

Consider a balance transfer: If you’re trying to pay down your balance, explore the option of a balance transfer. A balance transfer at a low rate makes it easier to pay down your balance, improving your debt to credit ratio as your balance decreases. Keep an eye out for balance transfers with no fees, zero percent interest during the introductory period and a low rate after the intro period expires. Know that the APR on these offers can jump to above 20 percent after the introductory window – though all credit union interest rates are capped at 18 percent.

 

Make all your payments on time: Timely payments establish a track record of reliability and boost credit. If possible, set up automatic monthly payments along with text and email alerts to remind you of your due date.

 

For controlled spending and easy qualification, go with a secured card: If you’re wary that a new credit card may make it more difficult to control spending, secured cards may be a great solution for you. They’re also a good option if you have little to no credit or your credit standing is below average. Secured cards require that you provide an up-front deposit, which then equals your credit line. Because secured card limits cannot exceed what you have deposited and tend to be lower than other cards, they help you control your spending. Secured cards also aid you in establishing a track record of on-time payments. Navy Federal is one of several lenders in the market with a secured card that can help you stay within budget and build credit.

 

Be smart about opening and closing accounts: As a general rule, avoid closing any card accounts. Having a higher average age on your credit accounts positively impacts your credit score. Beware not to open a large number of credit cards in a short span of time – doing so can indicate to lenders that you are overly eager for credit.

 

Pay down your balance as much as possible each month: Fully paying your balance helps you maintain a healthy debt to credit ratio. If it’s not possible to pay down your entire balance, try to at least pay down some portion to manage your debt and minimize interest payments.

 

Maintain some level of activity: Make regular purchases with each of your cards, even if minimal. Complete inactivity can lead to the account being closed. Your credit can even be adversely impacted by inactive cards before the account is shut down.

 

Don’t rely on debit or prepaid cards to build credit: Debit and prepaid cards are great additions to your wallet for convenience. However, these cards draw on available funds from an account instead of a line of credit. So using them will not boost your credit.

 

Keeping these tips in mind, you can move forward with a sense of confidence about how to put your cards to work for you. Just remember that credit cards are one of several tools in your toolbelt when it comes to building that solid credit score.

 




All of this week's top headlines to your email every Friday.


 
 

 
sarc-osi

Sexual Assault Awareness Month: OSI’s perspective

Sexual assault is a problem that affects our entire society, especially our Air Force. The Air Force Office of Special Investigations’ role in combating sexual assault includes conducting thorough investigations and provi...
 
 

Gaining Altitude – Growth Opportunities for the Week of 18 Apr

Through our character – an opportunity to reflect on important issues in our community - Christians around the world are celebrating Easter or Resurrection Sunday this week. Many have a tradition of wearing new clothes on that day as a way to symbolize the newness of life.  You know how it feels to have a...
 
 

Gaining Altitude – Growth Opportunities for the Week

Through our character – an opportunity to reflect on important issues in our community - There is an old saying: “Give someone a fish and you feed them for a day; teach someone to fish and you feed them for life.” The same is true in developing character.  You can give a law or command...
 

 

The Emotionless Leader: trusted, respected by Airmen

“I don’t want to hurt her career …” “He’s the best NCO I’ve got. I don’t want to see him lose a stripe …” How many times have you heard someone in a leadership position make statements such as these when contemplating disciplinary actions when an Airman or NCO makes a terrible decision? Whether due...
 
 

A Chaplain’s perspective on sexual assault

Have you ever had your soul torn in two? In other words, have you ever been hurt at such a deep level that you don’t think you will ever be healed again? That is what happens with a sexual assault. It cuts deep into a person so that their very being is damaged in ways...
 
 

Gaining Altitude – Growth Opportunities for the Week

Through our character – an opportunity to reflect on important issues in our community - We don’t like people to be insincere. But how do we know when a person is insincere?  George Orwell said long ago, “The great enemy of clear language is insincerity. When there is a gap between one’s real and one’s...
 




0 Comments


Be the first to comment!


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>