How to Build Up Your Credit Score Using Only Your Credit Card?

Credit cards are generally known as great tools for unexpected emergencies or situations when an individual cannot keep up with his monthly expenses. To a degree, they can be extremely useful, however, most people tend to use them too often or delay paying them off and this can lower their credit score by a considerable amount. Furthermore, lenders typically look at a potential borrower’s credit utilization ratio when assessing his eligibility for loans. This ratio is calculated by looking at the amount of money an individual has access to (through his credit cards) and then determining what percentage of the total available amount he is currently using.

In most cases, a credit utilization ratio of over 30% will lower your credit rating. In other words, as useful as credit cards may be, using them improperly can also have serious consequences and lower an individual’s credit rating.

This having been said, having a healthy financial life and paying attention to how you use your credit cards can also help you build up your credit score. Here is what you need to do:

  • Find a Credit Card That Comes with Great Rewards

Different lenders have different offers when it comes to credit cards. Look for one that comes with travel perks and cashback offers. This way, you will also get various benefits on top of raising your credit rating. Generally speaking, you should first look for a credit card that can be used both in the country as well as abroad and works on a no-fee basis. At this point, you should also make sure that you choose a credit card that has a relatively low interest rate and as few additional charges as possible.

  • Use the Card in Stores That Offer Discounts

Various stores offer discounts to clients that pay for their purchases using certain credit cards. Be sure to use your in these shops to get as much as possible out of your deal. However, you should not restrict the card’s usage to these locations. If you need to, pay using the credit card in any store that you want.

  • Use the Card Every Couple of Weeks, but Repay the Money as Soon as Possible

How often you use your credit card will affect your credit rating. The golden rule is to use the credit card sparingly and to always repay the money as soon as possible. By doing this, the lenders will conclude that you can manage your income and keep your debt under control.

  • Never Reach the Limit of the Card

If you have a decent credit score, lenders will set a relatively high borrowing limit for your credit card. However, his does not mean that it is a good idea to ever max it out. Regardless of how much money you can borrow using it, try to only make small purchases with your credit card. The important thing here is that you are not reserving credit that you do not intend to use. How little you borrow is irrelevant. 

  • Keep Your Credit Utilization Ratio Under 30%

Your credit utilization ratio is calculated by looking at the limit placed on your credit card and then determining what percentage of that you have borrowed at any given time. Ideally, you should keep this ratio under 30%. Anything more than this will temporarily lower your credit rating and make it more difficult to get loans from the bank. Please keep in mind that the effects of going over the 30% limit are temporary. Once you pay off your credit card debt, your credit rating will return to normal.

Is It Safe to Give Your Children Access to Your Credit Card?

Most people use credit cards weekly, if not more often. These financial tools can be invaluable for those who may have to pay for emergency expenses or who simply need access to various services and products but cannot afford them at a certain moment. It is also important to mention that credit cards can be useful, as well as dangerous. Maxing them out, forgetting to pay them off, using them too often, or never using them (yes, this is an issue as well), can cause the card owner’s credit rating do drop. However, these cards can also be used to increase an individual’s credit rating, provided that they use them responsibly.

This having been said, is it a good idea to give your children access your credit card? While doing so does have certain benefits, it all boils down to whether or not they are responsible enough not to abuse them. Here are a few things to consider:

  1. You Can Make Them Authorised Users

While it is impossible for underage children to have credit cards of their own (considering that they do not have financial histories), they can use their parents’. The minimum age that is required to become an authorised user of a parent’s credit card depends on the lender. Some set the age limit to children of 13 and over, while others restrict this service to those who are 16 and over. Regardless of this, making your children authorised users of your credit card will allow them to legally become extensions of the card owner. In other words, the credit card agreement will still be based on the parent’s credit rating, but the children will be able to use it.

  • Authorised Users Can Build Up Their Credit Rating Using the Card

While an authorised user is an extension of the primary cardholder, his credit report will track the credit card’s utilization. This includes how often it is used, the amount of money that is borrowed using it, and how quickly the debt is repaid. The main advantage of this service relationship is that the authorised user can expand his financial history and build up his credit rating by using the card.

  • It Is Possible to Set Limits for Authorised Users

Most lenders that offer credit cards will allow the primary cardholder to set spending limits for the authorised users. This enables parents to limit how much money their children can spend using credit cards.

  • Smartphone Apps Can Track How the Credit Card Is Used

Almost all lenders offer apps that their clients can use in order to check their credit card debt, as well as their transaction history. This can be a great tool for parents that want to keep an eye on their children’s spending habits. In some cases, it may even be able for the primary cardholder to remotely revoke the usage authorisation of his credit card.

Generally speaking, credit cards can be extremely safe, and useful, provided that the primary cardholder takes precautions. Giving a teenager access to your credit card can be safe, as long as he is responsible and does not abuse it. Furthermore, in the long run, making your child an authorised user may save him a world of trouble. By using the credit card and ensuring that the debt is repaid (by you or anyone else), he will build up his credit rating. This can be invaluable when he goes to university, applies for a student loan, or tries to take out a personal loan once he becomes financially independent.

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