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The right way to use credit

Posted at 2:40 PM, Feb 07, 2019
and last updated 2019-02-07 16:40:17-05

Are you using a credit card?  Did you know there's a right way to use a credit card?

David Sant, Chief Marketing Officer with Cyprus Credit Union, says using a credit card correctly will keep your credit score high and help you be approved for loans, jobs and additional credit in the future.  He recommended some steps you can take to ensure that you are using credit the right way.

Start Slow
If you are trying to build your credit, it`s important to start slow. Don`t start applying for credit cards left and right because that may imply to future potential lenders that you are dependent upon credit. Start with one card and then after a couple of years of using it responsibly, apply for another one.

Have a Plan
Anytime you use your credit card, you need to make sure you have a plan to pay it off. Ideally, you should be paying off the entire balance each month.
• Many people use a credit card in place of a debit card to make their small, daily purchases to help build their credit score.
• By only making the minimum payment each month, you will end up paying much more in interest over time.
• If you find it is difficult paying a credit card in full, do not be tempted to get another credit card. You can find yourself with a huge amount of debt by getting more and more credit cards.

Stay in Balance
While there`s no official benchmark for credit utilization, many people follow the 30% rule. This means, at any given time, your credit balance does not exceed 30% of your available credit.
• Proper credit utilization counts for about 30% of your overall credit score.
• If you are constantly going over this "30%" benchmark, but are making payments in full each month, consider increasing your credit limit.

Pay on Time
This seems like an obvious one but as the most weighted factor in your credit score at 35%, it`s an important one to remember. If you have a hard time recalling when all of your payments are due, consider setting up automatic payments or set reminders in your phones` calendar.

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