Local

May 17, 2013

Leveraging credit cards to strengthen your credit score

Randy Hopper
AVP Credit Card Lending Navy Federal Credit Union

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 annual percentage rate on these offers can jump to more than 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 are 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. Check with your financial institution to see if they offer 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 is 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.


 
 

 
U.S. Air Force photo/Senior Airman Russell S. McMillan

Commander shows off Team March at Capitol Hill

U.S. Air Force photo/Senior Airman Russell S. McMillan (From left to right) U.S. Rep. Mark Takano, who represents the 41st District of California, and Julia Steinberger, senior legislative assistant to Takano’s office, discus...
 
 
Brigade3

News from the 304th Sustainment Brigade’s Facebook page

Army Reserve Pvt. 2nd Class Kiet Duong, a culinary specialist with the 387th, sifts flour through a sieve during the competition. Duong, a Garden Grove, Calif., native, used the flour in the baked wheat rolls and Boston cream c...
 
 
150725-F-RK887-023

Swarz assumes command of 452nd Security Forces Squadron

The 452nd Security Forces Squadron held an Assumption of Command ceremony at the Cultural Resource Center here on Saturday, July 25, 2015. During the ceremony Lt. Col. Arthur J. Rodi, deputy commander, 452nd Mission Support Gro...
 

 

Team March loses family member

“It is with a sad heart that I inform you of the loss of Nancy Ferrick’s husband, Ron,” said Col. Russell Muncy, 452 AMW commander. “As many of you know, Nancy has been a fixture here at March for many years and has been the wing commander’s secretary for more than 20 years.” Ron Ferrick...
 
 
U.S. Air National Guard photo/Senior Airman Michael Quiboloy

163rd Attack Wing stands up at March Field

U.S. Air National Guard photo/Senior Airman Michael Quiboloy Col. Dana Hessheimer, commander, 163rd Attack Wing, California Air National Guard, March Air Reserve Base, receives the new wing guidon during an official re-designat...
 
 
U.S. Air Force photo/Master Sgt. John R. Nimmo, Sr.

Fourth Combat Camera Squadron inactivates after 19 years of worldwide documentation

U.S. Air Force photo/Master Sgt. John R. Nimmo, Sr. Maj. Hamilton Underwood, 4th Combat Camera Squadron commander, transfers administrative command of the 4 CTCS to Col. Timothy McCoy, 452nd Mission Support Group commander, Mar...
 




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>