Cut Your Credit Cards to Improve Your FICO Score

E - ESTABLISHING

CREDIT

 

Credit cards have varying opinions among the many personal finance pundits. It is a fact that utilizing them can be very risky, if not used properly, none of this is news. The reality is that credit cards are not risky, it is a matter of understanding how to add them to your financial arsenal. The key is to be intentional with the use of any kind of credit simply because it is not your money and you must someday pay it back.

The purpose of credit cards are to build credit. Good credit is the key to saving money throughout your lifetime because good credit gives you more favorable interest rates. Better rates will allow you to pay less for any kind of loan you may receive.

Mistakes are made with credit cards due to lack of understanding. Interest rates on credit cards can be high as 30% or more making them dangerous if balances are not managed. Balances can spiral out of control in no time as result of these high interest rates. The best advice is to avoid using credit for discretionary expenses. Limit their use to emergencies only if you are unsure if you can trust yourself.     

So how do I build my credit if I’m only to use it for emergencies? You are in luck as I have a cool way to use your credit card to build credit without putting yourself at risk. We all have that one bill that no matter the circumstance, we pay each month. If you don’t have a bill that you are sure to pay month in and month out without neglecting than you should not even be reading this article, as you are not ready to have a credit card. Now take your pick on what bill you want paid with a credit card it could be your phone bill, netflix subscription, a gym membership the merchant does not matter.

The next thing is to call your credit card company and set up automatic bill-pay on the day your bill is due for the selected merchant. If you already had an auto-pay set up with the selected merchant via a checking account, rush card etc cancel this auto-pay.

You now have a new auto-pay set up with your credit card. After this cut your credit card up and throw it away. This will ensure you do not use your credit card for any other purpose. If you need the card for any reason just call the credit card company and have them send you a new one. Don’t forget to call the selected merchant to update your new card info if need be when it arrives in the mail. It’s that simple, feel free to keep your card in a safe place instead of cutting it, if you believe you have the self-control.