Using Credit Effectively

Using credit, and especially credit cards effectively can help boost your credit score. But use them in the wrong way and it may do the opposite.

We have seen countless times people who have taken out a credit card to increase their credit score but are using credit cards in this way. You have seen credit Builder Credit Cards being advertised on TV and you may already have one. These are great to use but it is important to know how you should use them.

Firstly, do not use all of your credit limit. Try to limit your spending to around 50% of the limit maximum (it should be much less if you have a high limit). For example, if you have a £200 credit limit you should restrict your spending to around £100 per month.

Secondly, pay off the balance in full each month. When you receive the bill make sure you pay off all of what you owe and make sure you pay this on time. This will also avoid you paying any interest.

The above will show lenders that you can use credit responsibility and that you can pay it back on time. It shows that you do not rely on credit and will boost your credit score.

Using credit is not a bad thing and as the above explains it can be good for your credit score. But just use credit correctly; pay on time and don’t take out too much credit beyond your means.

For more information please speak to your local mortgage broker.