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.


 
 

 

The unseen leader

Over the years, I’ve seen many leaders come and go. The ones I admired, I took note of the traits I wished I had, as well as the ones I already possessed. It took me a long time to realize some of my personal and professional weaknesses were the very areas I gravitated toward in...
 
 

Never underestimate your impact

Every day I visit our great Airmen and every day I come across more than one that underestimates their impact to the mission. There’s the one-stripe maintainer, “just repaneling an aircraft,” for the next day’s flight, or the young personalist, “just issuing another identification card,” or the defender, “just guarding the gate.” The list could...
 
 

Gaining Altitude — Growth Opportunities for the Week

Through our character – an opportunity to reflect on important issues in our community Last week it was mentioned that New York Times columnist David Brooks thinks there are some important life skills that are critical to living a good life. ¬†Another one of them is “lightness, the ability to be at ease with the...
 

 
challenge-edit

Challenge yourself: Never give up, never quit

I once read that newly created cells in our bodies do one of two things: they either begin to decay or they become more vital. These cells choose their path based on what we demand of them. If we are sedentary, our brains signa...
 
 

Gaining Altitude — Growth Opportunities for the Week

Through our character – an opportunity to reflect on important issues in our community New York Times columnist David Brooks thinks there are some important life skills that are critical to living a good life. One of them is “bifocalism, which is the ability to see a situation from multiple perspectives.” When we see things...
 
 

Who am I? Who are you? Who are we?

What’s your job? Over the years, I’ve been asked this question countless times whether it be while in-processing new units, deploying, attending professional military education, or while participating in various panels. The answers are as numerous and varied as the titles in the Air Force. For most of us, the answer is easy. I am...
 




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=""> <s> <strike> <strong>