These days, many people are concerned with establishing or building their credit. Responsible credit card usage provides a number of ways to do so.
Usually, proper management of the accounts you have is all it takes to enhance your credit rating to and begin receiving better credit card offers.
Cards for establishing credit
If you don't have a credit card yet, and have a limited borrowing history, you might want to start out with a secured account. With this type of card you make a small down payment of a few hundred dollars to establish the account's credit limit.
Once you have had this kind of account for a few months, and kept your spending limited and your balance at a minimum, your good habits might be able to help you move onto a slightly better account.
Cards for building credit
If you've had a credit card for about a year or so, you've probably developed some habits on it that should help you make a decision about the type of credit card offer you might now be looking for.
For instance, if you regularly carried a balance over from one month to the next, finding a card with a low interest rate might be a good idea. On the other hand, if you were diligent in paying down all your various balances at the end of every month, a no annual fee credit card will help keep your costs to a minimum.
And if you need to move a balance from one card to another, you should look for balance transfer credit cards, which can be used to more shift a high interest balance to a card with a lower interest rate.
As with any other accounts, proper management of these types of cards will grant you access to a better credit card application in the future. Sound account management techniques include making sure all your balances are paid on time every month, as a payment that's even one day late will be a significant detriment to your score. Similarly, lower credit utilization - that is, the total percentage of your credit limit - will result in a better credit score.
What cards are available to those with top-notch scores?
When you have an excellent credit score (720 or higher), the world's best credit cards becomes open to you. These include accounts that carry the lowest interest rates, minimal fees, longer introductory periods and even rewards programs that can be a significant benefit in helping to reduce your overall credit card costs.
Typically, rewards cards for borrowers with excellent credit will carry low interest rates and significant perks, including the ability to earn more points for specific types of spending. Examining your past statements will help you determine if there are specific spending categories that you use your card for most often.
In general, the better your credit rating, the more beneficial the terms of your account will be, because that three-digit score is what lenders use to determine how safe an investment you are. Therefore, with a demonstrated history of responsible borrowing, you will be able to translate that into the best credit card deals possible.
Safeguarding your credit when you apply for a credit card
Lenders are required to post an inquiry against your credit report each time you fill out a credit card application. Too many inquiries on your credit in a short period of time can work against you. They can even give a lender the impression you are desperate for credit. Use good judgement when you apply for credit cards. Do your research first to determine the type of credit card that will provide the greatest value given your lifestyle. Then check the credit required. That way you can complete only one or two applications for credit cards that you really want and avoid negative activity on your file at the credit bureaus.
Reviewing your personal borrowing history and finances will give you the best possible idea of exactly what type of credit card offers will work well for you going forward.