Apply for a credit card if you don’t have one.  Using a credit card regularly and paying off your monthly charges on time is a great way to boost your credit score.  This does not mean you should spend a fortune on credit card shopping.  You can use your credit card to pay for a small purchase so repayment can be easy.

Choose a credit card with a low rate and with features that matches your lifestyle.  Read and understand the fine print before submitting your application.  Make sure that your payments are reported to the three major credit bureaus.

Pay all your bills on time.  Whether it’s your credit card, car loan, mortgage, electricity, cable, or internet bill, you should strive to submit your payment on or before the due date.  Why is this important?

35% of your FICO score is based on payment history so how timely you are in paying your bills can make or break your credit score.  Of course, prompt payment will boost your credit rating while frequent late payments will pull down your score.

Do not max out your credit limit.  30% of your FICO score is based on credit utilization so how you manage your credit line can significantly affect your credit score.  Experts recommend not using more than 30% of your available credit to maintain a high score.  If you own a credit card or credit cards, check your balance first and plan your spending ahead to avoid maxing out your limit.

Manage different types of accounts.  It’s not enough to have a credit card or multiple credit cards in your name.  You can further improve your credit rating by acquiring different types of debt such as a personal loan, a student loan, a car loan, or if you possible, a mortgage loan.

Lenders who check credit history are interested in how capable you are of manage debt and credit.  If you have a credit card, and at least two different loans in your name, this will surely strengthen your credit standing.  Of course, it’s important for you to submit your monthly loan payments on time to protect your personal credit.

Check your credit report regularly.  Consumers are entitled to one free report from each bureau every 12 months or annually. You can visit www.annualcreditreport.com to order your free report for this year.  You may choose to request all your three reports from the three bureaus at once or you can order one report from one bureau throughout the year.  If you want to directly order from a credit bureau, there is a fee of $9 to $12 per report.

Checking your credit report will give you the chance to examine it for possible errors. In case you find an incorrect detail, you can send a dispute letter to the bureau that issued your report.  You must also ensure that all your account activities are accurately recorded.

Related Post

• How to Avoid Hurting Your Credit Score
• Credit Myths that You Should Not Believe
• What to Look for in Credit Card Programs

Do not max out your credit card.  Did you know that maxing out your credit limit can deduct anywhere from 10 points to 45 points from your credit score, depending on your current rating?  Credit utilization makes up 30% of the FICO score so this is not a surprising fact.

If you would like to maintain a score of at least 720 and above, you should be very careful with how you use your credit limit.  Experts recommend keeping credit usage minimal, as much as possible below 40% of your available limit.

Don’t be late.  This may be an obvious tip but many people are still guilty of late payment.  Missing your due date can slash off anywhere from 60 to more than 100 points from your credit score.  The highest percentage in the FICO scoring system is payment history at 35%.  Just imagine how much you will be hurting your credit score if you fail to pay a bill on time.       This is true not just for credit card and loan payments but for all types of debts (electricity, cable, internet, etc).

Cancelling a credit card.  You might be thinking about cancelling one of your credit cards because it has a high rate or because you already have new credit cards.  Before you pick up that phone and request to cancel, you should be aware that your credit score can suffer.

If it’s an old credit card you’ve been using for years, closing it now would mean erasing the old parts of your credit history.  The length of credit history takes up 10% of your FICO score so you could be penalized for losing those precious account activities.  Instead of cancelling, consider keeping the card, using it only for a small purchase.  Be sure to pay it off in full right away so you won’t need to pay the interest rate.

Not having a variation of credit accounts.  If you only have credit cards in your name, it would be hard to boost your score.  Types of credit used makes up 15% of your overall credit score so it is recommended to acquire different types of accounts in your name.  Of course, timely payment for each account is crucial to maintain excellent credit.

Seeking debt settlement as a solution.  Resolving a debt problem through settlement can be an option but you should be aware that such a move will damage your personal credit score.  If you have higher score, you could lose up to 125 points if you settle.  Thus, before taking a step forward, weigh the matter carefully and see if the advantages of debt settlement far outweigh the damage it can do to your credit score

MYTH:  You can’t have a bad credit score if you are financially responsible.

This is not necessarily true.  Some behaviors which might seem like a good strategy to manage your finances can be bad for your credit.  For example, not using a credit card at all will not help you in building your credit score.  To build a solid credit score, you must prove your capability to handle debt and credit.  Thus, not having any debt at all may seem like a safe way to avoid debt problems but you won’t have a credit score.

MYTH:  A lower credit limit is better because it discourages overspending.

In line with the first myth, this is an example of a behavior which might seem like good for your finances but bad for your credit.  30% of your credit score is based on credit utilization.  Ideally, you should have a low credit-to-debt ratio to keep your credit score in good standing.   However, if you have a low limit, it can be difficult to keep this ratio at a low-level especially if you only have one credit card.  A higher credit limit  will be an advantage as long as you know how to use it in control.

MYTH:  Checking your credit will pull down your score.

Not true! Hard inquiries or inquiries made creditors in response to your application can affect your score.  However, checking your own credit will not hurt your score at all.  In fact, consumers are advised to check their credit regularly to make sure that all information contained in their report is accurate.

MYTH:  Carrying a credit card balance improves your credit score.

This is a dangerous myth to believe in because it encourages credit cardholders to leave balances unpaid, increasing the risk of debt build-up.  The reality is that carrying a balance from month to month will not boost your credit score.  The only thing it does to a card holder is make you pay additional interest rate charges.  The best way to manage credit card debt is pay your monthly balance in full, leaving no balance at all.

MYTH:  All you need is a credit card or credit cards to build credit.

Aside from revolving credit, managing different types of credit in your name is a great way to prove credit-worthiness.  You do not need to own multiple credit cards to raise your score.  One or two credit cards should be enough, depending on your needs and lifestyle.

The types of credit used makes up 10% of the FICO score.  Therefore, having at least one or two types of loans (car loan, personal loan, or mortgage) in your name will strengthen your credit history and credit score, assuming that you are consistent in submitting with your monthly loan payments on time.

However, credit cardholders should be clearly aware of their duties as well as the risks involved if the account is not managed correctly.  What kind of dangers associated with credit card use should you avoid?  Consider this list:

Uncontrolled Debt.  It’s easy to charge a purchase to credit without considering repayment obligations.  Sadly, many credit cardholders have found themselves stuck in bad debt because of poor spending habits.  Don’t let yourself be caught up in this trap.

Before using your credit card to buy anything, ask yourself, “Can I afford to pay back the charges in full and on time?”; “Do I really need to make this purchase now?”; “Will it be safer if I use cash for payment instead of charging it to credit?”

ID theft and fraud.  Many cardholders prefer to shop online. While there can be advantages to buying online such as convenience and a lower price, shoppers should protect themselves against the threat of Identity Theft and Fraud.

Purchase only from a reputable online merchant.  Make sure that the website uses a secured server with at least 128-bit of encryption technology to make sure that credit card information you provide online will be safe.

A secured web page should begin with the URL “https”, instead of the normal “http”, used in unsecured sites.  You should be able to check this from your browser’s address bar.  You should also see a locked pad lock icon on the bottom right corner of your browser.

Maximizing limit.  Using your credit limit to the full also has its dangers.  First, it increases the risk of debt build-up.  Second, your credit score can significantly drop if you frequently max out your credit limit.  This is because 30% of the FICO score is based on credit utilization.

Providing supplementary credit cards.  If you are a parent, you may consider giving your child a supplementary credit card.  This means, your child can use the credit card to buy things or pay bills but all charges will reflect on your account.  While this might seem harmless, you want to make sure that your child clearly understands how to manage debt and credit responsibly.  If your child racks up a large bill to your account, your personal credit score can suffer.

If you are a business owner using a credit card for business, you also have the option to distribute supplementary credit cards to your employees.  This can make business operations run more smoothly but you want to make sure that you only hand out a credit card to your most trusted employees.  In addition, you should regularly monitor your account so you can be immediately alerted if your credit is being used on unofficial expenses.

Tried and Tested Tactics for Paying Off Credit Card Debt

• Come up with a credit management plan on your own. Many consumers have successfully retired their credit card obligations by making important changes in the manner by which they manage their personal finances. Some found it necessary to limit the use of their lines of credit, so that they can avoid incurring additional credit and interest charges. Others decided to cut down on unimportant expenses and allocate more funds to their monthly credit payments. Still others tried to come up with payment plans which enabled them to gradually settle their outstanding financial obligations.

These things only show that you can come up with your own strategy for paying off your credit card debt. You simply need to spend considerable amount of time thinking about an appropriate do-it-yourself-tactic, as well as a sufficient sum of money that you can allocate for your payment strategy. And soon enough, you can work on your plan to get rid off your debt, in the soonest time possible.

• Sign up for credit counseling services. You can also rely on the experience and expertise of financial advisers to free yourself from the bondage of credit card debt. To do this, you just need to sign up for credit repair services with a credible counseling firm. For sure, with the help of a certified financial adviser, you will discover effective techniques on how you can gradually settle your credit obligations and soon rehabilitate your credit profile. Your credit repair course can also help you gain insights on how you should manage your personal finances so that you can prevent yourself from falling into debt traps, which can once again inflict severe damage to your credit standing.

• Apply for a debt consolidation loan. In some cases, you must apply for another credit program to completely retire your outstanding financial obligation. After all, you need to have ample funds to pay off your credit card debt, once-and-for-all. Good thing there is a popular credit program these days called debt consolidation loan. Under this program, you will receive sufficient funds that will allow you to settle all your existing credit obligations – such as credit card debt, an unsettled secured or unsecured personal loan, and even unpaid utilities bills. In return, the lender will ask you to pay back what you borrowed in affordable monthly installments which will be based on your financial capability.

• File for bankruptcy. Bankruptcy is rarely considered as an option for retiring credit card debt. Rather, it is perceived as a last resort, most especially if all the efforts that you have invested to pay off your credit obligations proved to be in vain. After all, with this program, you can expect to have a clean slate once your credit accounts have been completely discharged.

Still, you need to remember that there are stringent requirements imposed on those who wish to apply for bankruptcy. So, before you process the paper works and apply for this program, we encourage you to seek professional assistance from a bankruptcy attorney. Through this professional, you can soon discover if indeed you are qualified to file for this quick-fix strategy, and at the same time, you can receive valuable information that you can use once you start with your court proceedings.

Helpful Pointers for Credit Consumers

• Pay off your debt. There is no better way for you to fully regain your creditworthiness other than paying off your credit obligations. So, to succeed in gradually paying down your debt, you need to closely examine your personal finances. Try to identify expenses that you can eliminate to free up more funds which you can allocate for your credit installments. And as much as possible, pay more than the minimum amount required by your lender or card issuer. This way, you can prevent your interest charges from ballooning out.

• Stick to the terms and conditions of your credit accounts. We encourage you to review the fine print of your credit program, once in a while. In so doing, you can easily remember the provisions and restrictions imposed on your credit program. And this information will in turn help you come up with measures on how you can abide by the terms and conditions of your lines of credit for you to avoid paying huge fines and penalties that are usually charged on delinquent borrowers and credit cardholders.

• Use your credit card wisely. Keep in mind that your credit card activities are being monitored and reported to the three credit bureaus. And the employees of the credit reporting agencies use your credit and payment transactions in computing for your credit rating. So, if you are serious about your desire to cause dramatic improvements to your credit history, then you need to use your credit card wisely. Make sure that you pay your credit charges on time and in full each month. And see to it that you don’t max out the spending limit set on your card account. In so doing, you can gradually push your credit score up, until such time that you can fully regain your credit reputation.

• Order copies of your credit report on a regular basis. In some cases, your poor credit standing can be attributed to the outdated and incorrect entries found in your credit report. After all, the system used for updating your credit and payment transactions is not perfect and prone to human error.

This is the reason why finance experts encourage consumers, like you to regularly order copies of their credit files from the three credit reporting agencies – Equifax, Experian and TransUnion. This way, you will have the chance to determine what your latest score or rating is, and to validate the accuracy of the transactions listed on your credit report.

• Read, read, and read. We also suggest that you look for excellent sources of information that can help you achieve your goal of attaining thorough bad credit repair. You can visit the professional blogs and websites of finance advisers where you can obtain expert opinion on how you should manage your lines of credit. You may also take financial literacy courses online so that you can receive practical suggestions not only on how you can regain your credibility as a borrower, but more importantly on how you can responsibly manage your personal finances.

Say no to cash advance.  If an emergency or a situation requires you to get cash in a hurry, try to find alternatives instead of relying on your credit card all the time.  Cash advance transactions are instantly charged with interest.  Even worse, most issuers impose a higher interest rate on cash advances than the rate applicable to new purchases and balance transfers.  The moment you take out cash from the ATM, you automatically incur APR charges whether or not you pay the full balance on time.

Use your credit line sparingly.  If you can keep your balances below 30% of your limit consistently, you will be able to build and maintain good credit. More importantly, the risk of debt build-up is minimized since it will be easier for you to pay off a small balance.  If you’re planning to use your credit card for a large purchase, see to it that you do not max out or exceed your limit and that you can afford timely repayment.

Review your credit card bill.  Make it a habit to check your monthly account statement before paying your balances.  This is the only way you can be sure that all the charges in your account are correct.  Errors can sometimes occur but if you do not dispute unauthorized charges, you end up paying for debts you did not owe.

Avoid carrying a balance.  If you can pay your balance in full, then do it.  Paying only the minimum due can be tempting as you might want to spend your cash on something else.  However, although issuers accept minimum payment, paying the extra interest rate fees is not worth it.

If you own a reward credit card, the interest rate is most likely to be higher.  In fact, reward cardholders are strongly encouraged not to leave a balance if they are really after being rewarded.  Otherwise, the money you spend on interest rate fees might be more than the value of your rewards.

Understand the terms and conditions.  How familiar are you with the rules of the reward program?  For those who planning to get a reward credit card, spend a little more time reading the print.  Understand how you can earn points and get rewarded.  Get to know the reward system and find out how redemption is done.

On the other hand, for those who already own reward credit cards, it is still recommended that you review the Terms and Conditions of your card from time to time.  There might have been changes to the program or you might be missing on privileges that you deserve.

Before you do, here is a smart holiday spending guide on how you can use your credit card while steering clear from bad credit.

Set a personal spending limit.  How much do you plan to charge to your credit card?  What kinds of purchases will you use your credit card for?  Will you use it to buy gifts or to buy that one special gift for a loved one?  Are you thinking about buying a new gadget or a home appliance before the year ends?

It’s important to set your own limit, making sure that you will not max out or exceeding your actual credit line.  This way, you can take control of your credit card usage and avoid incurring a very large debt when the holidays are over.

Check the interest rate.  Many people have more than one credit card and if this is true in your case, you should check which of your cards have the lowest rate of interest and which ones carry high APRs.  Naturally, you want to avoid using a high-rate card for your holiday expenses.  If you plan to use a few credit cards for holiday shopping, you may consider consolidating your debts by transferring balances to a low rate card.

However, transferring balances to avoid expensive APRs should be done with caution.  You want to be very careful not to max out the limit on your low-rate credit card.  Keep in mind that it’s not just about being able to pay your credit card bills. Your credit score can also suffer if you max out your limit.

Leave other credit cards at home. Take only the credit card you need when you shop.  Having all your credit cards in your wallet may only encourage splurging. Furthermore, you will have a bigger problem in case your wallet gets lost or stolen.  Trying to call up different issuers to report the loss can be difficult and you will need to get a replacement for all the cards you lost as well.

Use cash as much as possible.  If you can avoid using your credit card this holiday season, then you will be in a much better position to start the New Year right with zero debt.  After all, spending a fortune is not necessary to enjoy the holidays.  What’s more important is for you to spend quality time with family and friends.  Look for happiness in things that money can’t buy.  A simple gathering with a few budget-friendly dishes can still be meaningful and memorable as long as there is love and good cheer.  So, if you don’t have the money, don’t feel obliged to use your credit card or run up debt just to survive the holidays.

Don’t delay with repayment.  If you have decided to use your credit card this holiday season, be prepared with a repayment plan, too.  As much as possible, you should pay off your full balance on or before the due date.  If your credit card offers zero rates, you should work on repayment at the quickest possible time as most issuers only provide a 6-month introductory period.

Now, how can you avoid being ripped off by unscrupulous organizations, most especially if you regularly shop online? The answers to this question are discussed in the succeeding paragraphs of this article.

What Not to Do When Shopping Online

• Striking business deals with a total stranger. Online shoppers, like you, are discouraged from dealing with the very first online merchants that they will come across with. Instead, you need to run background checks on the firms or vendors that you intend to do business with. Try to inquire about the accreditation of these enterprises with the state or federal government. And look for comments and reactions of the previous clients of each commercial establishment. After all, the information that you will gather from this activity can help you validate the credibility or legitimacy of the vendor that you wish to deal with. At the same time, it can help you reach a sound decision whether or not you should continue transacting with your chosen shop or store.

• Filling out online forms without checking first the security features of the web page or website. Do not provide you’re personal or credit details, unless you have thoroughly checked the security features of the web page you are currently viewing. Make it a habit to look for security indicators in each shopping site, before you disclose highly confidential information about you, or your lines of credit. For example, look closely at the URL bar and check if it displays the code “https”. You may also look for other security features like a padlock icon beside the URL bar, or the VeriSign logo, which is usually situated at the leftmost portion of the web page.

• Sharing passwords with other people. Never share passwords nor PIN codes with other people. Always remember that such codes help protect your debit or credit card information, and even the financial resources that are linked to them, from individuals who may wish to use them for their personal gain. So, as much as possible, keep your passwords or PIN codes to yourself. And make sure that you use strong codes that are not related to your personal information (your birthday, phone or office number, etc) nor to the personal information of your immediate family members (the birthdays of your wife or children, your wedding date, the age of your kids, etc).

• Using public computers. Keep in mind that public computers are prone to computer viruses and malicious software that are used by scam artists to spy on internet shoppers as well as online credit applicants. So, if you wish to shop for an item online, then you might as well use your personal computer to transact business with a commercial establishment. This way, you can prevent unauthorized parties, as well as the computer programs they use, from spying not only on your credit activities but also on your personal and financial information.

Three Credit Card Features

• Easy to prepare application requirements. You need to search for a credit card program that has easy-to-prepare requirements. For example, try scouting for card issuers that would only require you to submit your latest credit report, a copy or two of your identification papers, and a proof of your financial capability.

We also encourage you to look for companies that offer quick approval of credit card applications. This way, you can immediately activate your card and use it for financing your purchases and bills.

• Competitive rate of interest and fees. You should also look for card accounts that impose competitive rates of interest and fees. To help you in this matter, we suggest that you research about the prevailing interest rates as well as the usual upfront charges that are imposed on most lines of credit found in the market. This way, you will be equipped with the right information that can help you choose a specific credit card that will best suit your personal finances. At the same time, such information can help you avoid being easily swayed by smooth-talking agents to sign up for card accounts with fees and interest rates that are way beyond your financial capability.

• Sufficient credit limit. Keep in mind that the adequacy of the credit limit will largely depend on how you intend to use your card account. For example, if you are planning to use your line of credit to finance huge purchases, then we suggest that you apply for an unsecured credit card. However, if you wish to enjoy a lower spending limit so that you can succeed in curbing your problem with overspending, then you might as well sign up for a secured card account.

Some Last Minute Reminders

Now, let us tackle some last-minute reminders that you need to remember when you start shopping for a line of credit.

• Take out card accounts only from legitimate card companies. Keep in mind that this tip will help protect you from dealing with fraudsters and scam artists, whose main objective is to rip off credit applicants like you.

• Take all the time you need in shopping and comparing the features of various credit card programs. After all, this activity can help boost your chances of stumbling upon a program that will suit your needs, preferences, and most importantly your financial capability.

• If you are having a very difficult time scouting for cheap credit card accounts, then you might as well seek assistance from your friends, co-workers and relatives, most especially from those who have recently applied for lines of credit. For sure these individuals will be happy to guide you to credible sources of card accounts that offer low rates of interest and excellent payment terms.

• If you wish to use your card account to rebuild your credit history, then you need to make sure that your chosen card issuer has a close working relationship with the credit bureaus. After all, the success of your credit repair activities will depend largely on the timeliness of the reports that will be submitted by your card issuer to the three credit reporting agencies.