Got financial goals such as purchasing a new car or a home but have a credit score that’s standing in the way? Well, opening and maintaining a credit card account can improve your FICO score.
Before you fill out any credit card applications, shop around for the best deal. Look for credit cards with a reasonable APR and no annual fee if possible. Then apply for one credit card that you’re sure your submission will be approved. Applying for too many cards can actually hurt your credit score.
Once you get your new credit card, don’t go on a spending spree. Maxing out your credit card will only scare away lenders and harm your FICO score since your “credit utilization ratio” is taken into account when determining your creditworthiness. It’s best to keep you usage of any credit card to less than 30% of your available credit line.
Once you’ve used your credit card for some considerable amount of time—six months to a year, your timely payments and responsible use of your credit line serves as proof that you have a sensible approach to credit. This new credit history will be taken into account when determining your FICO score. The new credit card activity may hold more weight than older, negative credit history because your new behavior indicates a change for the better.
It’s important that you do not shift “old debt” onto this new credit card because doing so won’t improve your credit utilization ratio and might even harm your FICO score. It’s better to keep your debt usage low on the new card and slowly (or quickly) pay off the older credit cards which will eventually help improve your credit score.
To improve your FICO score and get access to the best credit offers, strategically use existing and new credit card accounts to your advantage.