If you are looking to get a mortgage on a home and your credit score is low, you might be disheartened. However, you do not need to worry. By taking a few small yet consistent steps, you can build your credit score again. In fact, one of the ways in which you can improve your credit score is by knowing how to work your credit cards and lines of credit the right way.
1. Opt for a secured credit card
This is one of the most beneficial credit cards to apply for. With a secured credit card, you need to keep a deposit in a checking account for which you get a line of credit. For instance, if you keep $300, you get a credit card with a limit of $300. Some credit cards give you more than the deposit you keep. With a secured credit card, if you default on the payment, it is automatically taken from the linked checking account so your credit score stays safe.
2. Keep low credit card balances
Maxing out your credit card balances is a sure way to get your credit ratings into trouble. The standard limit is that the balance on your card should never exceed 35% of your card’s overall limit. So, if your credit card limit is $1,000, try not to carry a balance that exceeds $350. Doing so will stop your credit scores from dipping further and also give them a much-needed boost. You can spread out your credit card debt among your different cards as well.
3. Never consolidate balances onto a single credit card
When seeking advice on how to improve a bad credit score, one of the main tips any expert will give you is to never consolidate all balances onto a single credit card. This is because doing so will probably raise your balance way higher than the ideal 35% as seen in the previous tip. Unless you are really going to save hundreds of dollars, consolidating all your balance into one card is really not worth it. A better alternative is to work out spreading your debt between different credit cards that all offer you a low rate of interest.
4. Open a credit card account
This might sound like a no-brainer, but there are many people who do not have credit cards. That is one of the major reasons why they have low credit scores. Contrary to popular myths, credit cards are not bad for you. If you make payments on time, they can really give your credit rating a much-needed boost. Also, having a credit card or two over a long period of time will help establish you as a reliable borrower who makes good on their payments. This is definitely a green signal when you apply for financial products like a mortgage.