Smart ways to use credit successfully

Credit can be a wonderful thing, and there are plenty of ways you can use your available credit effectively (and cautiously) to build a strong credit score. Here are three ways to make credit work for you, plus one thing you’ll want to avoid so you don't get in over your head.

Be punctual with your payments. You’ll want to be sure to make your payments on time, every time — and not just with your credit card payments! Any financial obligation you have needs to be paid on time to build strong credit. Consistent payments — at or above the required minimum — can help your credit score skyrocket over time. Conversely, late and missed payments are tracked on your credit report, and when you apply for a new loan or line of credit, creditors will use that payment history to determine your “creditworthiness,” or how suitable you are to receive credit based on your reliability in paying money back. That’s why it’s really important to show you’re responsible as your build up your score.

Do some comparison shopping. Just as you wouldn’t make a big purchase without shopping around first, it’s important to shop around for a credit card that fits your needs or offers perks you’ll use. Do you travel a lot or use/give gift cards? Maybe you’re looking for points you can turn in for event offerings such as sports tickets or movie passes. Or, some credit cards offer cash back that you can use any way you’d like. A combination of these options is ideal, because you can leverage the options to suit your situations at any given time. After all, if you’re going to use a credit card, you might as well find one that works for you!

Do the math. Make sure you can afford your credit card payments. Healthy credit use often means paying the balance off at the end of the month, or at least paying more than the minimum required payment. This helps your credit and your peace of mind.

Try not to need your credit card. Credit cards should be just one tool in your financial toolbox, not the whole kit and caboodle. Don’t use a credit card to supplement missing income, and don’t become dependent on your card. This habit can get you into financial trouble later and can follow you for years! If you aren’t sure you can use a card safely and responsibly, it might be best to hold off, or try a secured credit card first.

Building and maintaining healthy credit can be hard work. Strong habits of paying your monthly bill on time, not becoming dependent on credit card use, and paying more than the minimum required payment are all great ways to help your score increase and, over time, build your potential for stronger purchasing power.

For more information about healthy credit habits, contact UBT’s Financial Literacy Manager, below.

Want more expert advice and helpful info on credit cards? Click here.