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Using a credit card to build a good credit score

Using a credit card directly affects your overall financial health. It is critical to maintain a decent credit score so that you can qualify for loans at reasonable interest rates. However, building credit can take time, especially if you have previously faced financial hiccups while repaying credit card debt. To help you streamline your finances and build or improve your credit scores, here are some aspects that you should emphasize on while using a credit card.

Timely payments
Paying off your credit card balance every month is the first step toward building or improving your credit score. How you manage your debts, that is, when you pay and the amount you pay determines approximately 35% of the credit score. Religiously making full payments each month will also save you from the wrath of high-interest rates.
Spending habits
One of the major perils of using a credit card is that you can easily lose track of your monthly spending limit as the money isn’t immediately deducted from your account. So, avoid being a spendthrift and ensure that you set a budget, spending only on purchases that you will be able to make full repayments for. Practicing such discipline will not just enhance your credit score but will also help you pay off debts faster.
Credit card balance
The amount that you owe the lender accounts for almost 30% for the credit score. So, when your primary objective is to build credit, it is always wise to opt for a credit card with a low balance. Having a higher balance means you have access to higher utilization, implying that you can overshoot your budget. Additionally, this elevates the possibility of you not making full payments or missing payments, which ultimately impacts your credit score.
Credit card type
It’s a good idea to pick credit cards that are specifically aimed for consumers with a history of bad or no credit. They might not have the best rewards, but they can help you build good credit. As your credit score and repayment habits change, you can switch to a better credit card that has a higher limit and additional perks.
Maintaining an account
Almost 15% of the credit score is based on how long have you used a credit card. Regularly using one credit card for a long time demonstrates that a borrower is reliable and steady. In the future, when you are applying for another credit card, apart from the repayment patterns, the lender will also verify how long you have used a credit card. Opening multiple credit card accounts just to get sign-up bonuses and closing them immediately is not a good sign. It infers that the debtor is caught in major financial trouble, and this detrimentally affects the credit score.

Popular credit cards for building credit
The following are some of the most popular credit cards for borrowers who wish to build or improve their credit score: