How to use credit cards to help your credit rating

A person's credit score is made of  several elements, how you use and pay for the credit you have in your name, is the most important factor in deciding your credit rating.

Credit cards are the most flexible form of personal credit available, and should be used carefully so as to hopefully increase your credit standing, or at least not to harm it.

The number of cards you have in your name, as well as their balance and the credit limit are important parts of your overall credit standing.  The way in which you use these cards, will be used as an important calculator of your good credit standing.

If you have for example, four cards available to you. You should assign one of the cards as not available for purchase’s. This card is set aside for use in emergencies only. The other cards should be divided into two cards for general use, and one for very occasional use.

This helps to spread your credit across all your available cards.  The two cards used for all your general purchasers should always be the ones that have the lowest available credit.

These two cards should always be paid off each and every month in full. This will greatly assist your credit rating and will also help to control your actual credit card balances.

The card that you have designated as your emergency credit card should not be carried around in your wallet. It should be kept at home locked safely away, this card should be the card with the highest spending limit. You should also aim to make sure that this card has no annual fee attached to it. You should not use this card if at all possible

You could even go as far as cutting it up. The one thing, you should not do is cancel the card. Cancelling credit cards, damages your credit rating, even if you have cut up the card the credit is still available as far as your credit report is concerned.

Not using the card shows restraint and control of your finances from the point of view of assessing your credit worthiness.

The fourth card should have an available balance lying between the other three cards and should be used sensibly. It is okay to allow a small amount to build up every month, but three or four times a year the balance should be cleared.

You should never consider reaching your maximum limit on this card or any of the others, Again from the point of view of those examining your credit this will be seen as irresponsible and lacking financial control.

Generally speaking, credit card balances should not exceed 50% of the available credit line at any one time.  If you cannot afford to make the payment in full each month you must pay off the maximum can possibly afford.

Paying the minimum, means paying huge interest, again, as far as your credit worthiness is concerned, this is irresponsible spending. Without thought to how you will play it back, this is not helpful to your credit rating.

If you're buying ‘big ticket’ items with your card you need to be absolutely certain that you can repay the amount quickly, and you should aim a maximum of six months. You should also not exceed the 50% of your available balance rule.

If you manage your credit card sensibly, you will increase your credit rating, which will make it easier to obtain mortgages and other credit facilities.  And not only that, because of your good credit standing you will pay less interest on those loans.

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