Did You Know These Credit Card Tips?
Credit ratings can quite literally run your financial life – especially these days, as banks try to recuperate from a financial crisis that affected the global economy. Other companies and creditors are also playing it safe when it comes to a person’s credit, because they take on great financial risks with their business dealings. In other words, you really need to be on top of your credit game these days if you want them to consider you worth the risk.
If your credit rating is poor, it can prove difficult to get a loan, get approved for a mortgage, and in some cases even get hired for a job. Meanwhile, building and maintaining an excellent credit rating can open the doors to a wide array of financial opportunities – you’ve proven that you’re financially responsible, so creditors and other companies want to do business with you.
The Credit Card Dilemma
While loans and mortgages can greatly affect your credit rating, it would seem that the biggest credit rating damage culprit would be credit cards. The reason for this is obvious: it’s easier than ever to get your hands on a credit card. Credit card debt is also sometimes seen as a “bad debt”, while a student or business loan isn’t seen in such a poor light because they can help you further your career and thus your financial standing.
Credit card debt has become a common phenomenon as individuals around the world struggle with mounting debt. In 2010 it was reported that Australians lead the world in credit card debt, surpassing their American counterparts.
The easiest way to avoid this situation is by paying your card in full and on time every month. However, there are also a few other things you can try to ensure that your rating stays where it’s supposed to.
Pay Credit Card in Full Two Weeks Before It’s Due
Credit bureaus send monthly balances to banks, institutions and credit rating companies. If you pay your card two weeks before it is due you not only ensure that your payment was made on time, your monthly balance will also show up as zer0.
Do Not Open More Than Two Credit Cards a Year
Simply put, this makes creditors nervous. If you go on a credit card spree it looks like you are going to borrow a lot of money you don’t have. By the way, retail cards count as credit cards.
Only Check Your Credit Rating Once Every Six Months
If creditors notice that you are checking your credit rating often, they may get the impression that they have something to worry about. In other words, they might assume that you’re watching your credit score like a hawk because it’s either about to take a dip or you are trying to bring it up.
Do Not Use More Than 50% of Your Credit Limit
Your credit rating may take a dip if you use more than 50% of your limit. It’s one of the tell tale signs to creditors that you’ve taken on a large amount of debt you may not be able to pay off.
Credit ratings don’t have to be complicated – just make sure to practice these responsible finance tips and you’ll be confident that you can keep your credit score in great condition.
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> Pay Credit Card in Full Two Weeks Before It’s Due
I think paying to 0 before the statement date only makes sense if you are trying to show a lower credit to debt ratio. A balance of zero can also be seen as inactivity as the banks don’t and can’t see cash flow activity.
> Only Check Your Credit Rating Once Every Six Months
I will strongly disagree. There are credit monitoring services that check your credit report on a daily basis.
> Do Not Use More Than 50% of Your Credit Limit
I’ve read figures of 30%. How did you reach 50%? Is this based on the percentage of each card, or as a percentage of your total available credit limit?
@SUN
> Pay Credit Card in Full Two Weeks Before It’s Due
Can you backup your statement on this? Do you work for a bank or credit lending firm?
> Only Check Your Credit Rating Once Every Six Months
You don’t have to pay for a credit monitoring service; that’s money out of pocket. Instead use a rotating schedule and get a credit report from each of the CRA’s in turn, once every 4 months for free.
Tim, what is it you need clarification with? Was there something I said that conflicts with your understanding?
Sun,
You said:
“> Pay Credit Card in Full Two Weeks Before It’s Due
I think paying to 0 before the statement date only makes sense if you are trying to show a lower credit to debt ratio. A balance of zero can also be seen as inactivity as the banks don’t and can’t see cash flow activity.”
I’m asking if you have direct knowledge of banking, or mortgage, practices? You seem to be making an informed statement, and I’d like to confirm your statement was fact or opinion. Banks have lots of money, and they employ programmers to sift thru huge databases to learn intimate details of our lives. They are likely though, to create some sort of “separation” from the data mining by selling their data to an database aggregation company for comprehensive analysis. The deal could easily enable the bank to draw from that digested information back on their own customers. I’m not a fear monger, just a mainframe programmer and I fully understand the power of data, especially when it’s combined — it can tell a fairly full story.
You also said:
“> Only Check Your Credit Rating Once Every Six Months
I will strongly disagree. There are credit monitoring services that check your credit report on a daily basis.”
My reply is: You don’t have to pay for a credit monitoring service; that’s money out of pocket. Instead use a rotating schedule and get a credit report from each of the CRA’s in turn, once every 4 months for free. This is a scheme “method” I learned by monitoring personal finance blogs, I’m not the inventor.
Regards,
Tim
I do not work for bank. I don’t think working for a bank automatically makes you qualified to speak on credit card ratings. In the overall scheme of things, your debt to credit ratio is a big part of the algorithm. I can attest my score jumped 100 points just by paying down my total debt for the last six months (going from 50% utilization to 30% utilization).
Based on my dealings with Bank of America, I know they are more generous with their credit lines than with other banks. Bank of America can see their own data, but Citi, Chase, etc don’t have the same kind of visibility nor grant as much credit. That may or may not speak to your theory on data mining. These is my personal experience and observations, but I don’t know if it can be applied macroscopically.
Interesting challenge. Thanks.