Credit cards can be managed the right way or the wrong way. Going on shopping till you drop after getting the highest possible credit limit is definitely not the right way of managing a credit card.
Here are some guidelines by www.essayjedi.com as to how you can handle it right.
The credit score is calculated using certain percentages as follows:
- Your payment history contributes 35% to the score. The score will be low if you always pay bills on time.
- Amounts owed by you contribute 30% to the score. This is also referred to as utilization percentage. It is a good idea to keep the utilization percentage below 30%.
- Credit history duration contributes 15% to your credit score.
- Contribution of new credit acquired towards FICO score is 10%.
- The contribution of types of credit to the score is 10%. For optimal score, it is good to have a mix of trade lines such as credit cards, mortgage, installment loans and car loan.
How to Pay Credit Card Bills
The amount of credit used is derived from your current statement which is generated on the Statement Cut Date. You can control your credit score by making payment for whatever you don’t want to be reported before the Statement Cut Date. Typically, the Payment Due Date is about 25 days from the Statement Cut Date. You can avoid paying interest by clearing your entire balance before the Payment Due Date. It is not wise to make only the minimum payment required to be paid for the month. This may be perceived as risky behavior and creditors may take adverse action. Therefore, you must pay more than the minimum payment. Most creditors would expect a payment of 10% to 20% of your current balance each month.
How to Obtain an Increase In Credit Line
You can get your credit line increased by using credit cards that provide rewards program such as cash back, mileage points, points for spending, etc., and adjusting the points collected against your spending. This helps to reduce your spending every month. This means that you must use your credit cards as much as you can as reward points can add up quickly. You should never look at credit limit as additional spending money. Treat your credit cards like debit cards and do not spend beyond what you have in your account. This way you will be able to keep up your payment history and become eligible for an increase in credit line.
How to Build Credit
Different levels of credit are allowed for credit cards depending on different levels of credit worthiness. If you are eligible only for a lower tier credit card because of your current credit score, you can take it straight away. Strive to make payments on time and manage your account well for a period of six months to one year. Your credit score would increase dramatically and you can apply for a higher tier credit card.
How to Handle Bad Accounts
There are a couple of options available to you for dealing with the accounts that are in bad standing: you can wait for them to go off from your reports in seven years’ time or contact the creditors and negotiate a deal with them. Another option that you can try is to use alternative payment options, such as prepaid Visa cards . Not only does applying for such a card requires no credit check, they can also be highly effective as a financial management and budgeting tool, making it easier to control your spending. Lastly, try writing to creditors and requesting them to remove the bad trade line once you clear the debt in full.