Maintaining a good credit score is essential in order to achieve financial success and a vital component when financing a home, car, or other major purchase. A great way to start building good credit is the use of a new credit card – responsibly. Read on to learn exactly how a credit card can help you build good credit and ultimately improve your financial standing.
Choose the Right Card
It’s important to be mindful of the fees associated with any credit card you choose. Not only can they add up quickly, but they can also have an impact on your overall credit score. When looking for a credit card, find one with no annual fee.
You’ll also want to pay attention to the rewards and perks associated with the card. Some credit cards offer cash back or airline miles that can help you save money when you use them. It’s best to find a card with rewards most suited to your normal spending habits.
When you apply for a credit card, the lender will look at your current credit report to determine if you qualify. Be sure to check your credit report before applying for the chance to correct any existing errors that may have appeared. In addition, make sure you’re ready to provide other information the lender may ask for, such as proof of income.
Pay Your Balance in Full Each Month & Use Your Credit Card Regularly
Paying your balance in full is one of the most important steps for managing and improving your credit score. When you’re in the habit of paying in full, it helps reduce your credit utilization ratio and shows potential lenders your ability to manage finances.
Another perk of clearing your balance each month is avoiding interest charges, which can accumulate and make getting ahead financially more difficult. You’ll also eliminate the risk of late payments and any damage they may cause to your credit score. Additionally, by paying off your balance in full each month, you’ll never need to worry about reaching your credit limit.
Using your credit card regularly is also an important part of building good credit. By doing so, you will be able to further demonstrate to creditors that you are responsible with your spending and can manage credit. The key is to use your card responsibly and to always make sure you can afford to pay off your balance.
Keep Your Credit Utilization Low
When you use credit to pay for purchases, aim to keep your credit utilization low. Credit utilization refers to the amount of credit available to you in relation to how much is currently used. For example, if you have a $1,000 limit on a credit card and you’ve charged $500 to it, then your credit utilization is 50%.
Ideally, your credit utilization should be as low as possible with most experts recommending your utilization stay below 30%. Continuing our example of a $1,000 card limit, you’d hope to have a charge total of no more than $300. Maintaining this practice will help ensure lenders see you as a responsible borrower.
Monitor Your Credit Report
Check your credit report regularly to make sure that the information it contains is accurate and up to date. You should also look for signs of fraudulent activity or identity theft. You can request a free credit report from each of the three major credit bureaus – Experian, Equifax, and TransUnion – once a year. You may also want to sign up for a credit monitoring service that will notify you if there are changes to your credit report. This will help you stay on top of any errors or fraud. Additionally, consider setting up alerts with your credit card provider so that you’ll be notified whenever your credit card is used. By monitoring your credit report, you can stay ahead of any issues that could potentially damage your credit score.
At Lakeland Bank, we offer customers the ability to check their credit score using Credit Sense. Not only can you use this resource to monitor your credit score, but also access your full credit report and customized tips to improve or maintain your score.
Boost Your Credit Score
A good credit score is a key part of your financial wellness. Whether you’re looking to start building a positive credit history or increase your current score, opening a new credit card can be a great help. Always remember that it’s important to choose the right credit card for you, make payments on time, and avoid racking up debt.
Choosing the right credit card is easier than ever with Lakeland Bank’s competitive rates and full range of reward options. Whether you want to pay down balances faster, maximize cash back, earn rewards, or begin building your credit history, we have the card for you!
Wondering where your credit stacks up? Although credit scores are calculated differently by the various credit bureaus, use this calculator to get an estimate of your score.