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We’ve looked at a few ways to boost your credit score in 2023. Your credit card is a great way to do that, and here are three top tips.
There are a lot of questions about getting the right credit card to boost your credit score. It’s not about the type of credit card you have. If you do pay off the balance in full, that’s when you want to look at specific credit cards for points and rewards. You’ll also want to look at the right credit card for interest rates, but to boost your score doesn’t matter.
It’s all about how you use the credit card you have. Here are three tips to boost your score.
Boost your credit score with good credit utilization
Start by keeping your credit card use to a minimum. You don’t want to spend more than 30% of your balance on the credit card. At least, your statement should only show 30% of your credit that you have available—your credit utilization.
If you put on a big purchase during the month, make sure as much of it as possible is cleared by the end of the month. I don’t recommend buying anything on credit that you can’t clear within the month. My credit cards are used for cash flow and that’s it.
When it comes to the date your statement is calculated, your utilization should be at 30% or less. I try to keep mine at 10% or lower as much as possible.
This is across all your cards. You’ll want to try to keep each individual card below 30% but if one is at 40% and the other is at 10%, you’re doing well. Your total credit available is taken into account.
Pay off the statements each month
Another way to use your cards to boost your credit score is to pay off the full balance. There is a common myth that you want to have a small amount roll over each month. This isn’t true at all. You just end up adding interest to your credit cards. Why would you want to do that?
You do want a balance at the end of the month on the statement. Make sure it’s a good percentage so that your company reports the balance to the credit report companies. This shows that you use your card. Then, pay off the balance. Your card won’t incur any interest and when it comes to the next statement, you show that you can are good with your money.
It’s clear that you are sensible with purchases. If you keep a balance, you show the credit score* companies—and therefore other lenders—that you tend to live beyond your means.
Increase your credit when available
A lot of companies will offer you an automatic increase for your credit card. You have to approve this increase, and it can be tempting to say no. If you’re struggling with money, maybe saying no is the right thing. At the same time, saying no means you end up with your utilization suffering.
When you increase your limit, you’ll lower your utilization. This helps to show that you are sensible with your purchase.
Increase your limit while getting your utilization down. You’ll want to do this with other cards or lines of credit you have available. The more credit you have available, the better your utilization keeps looking.
Just keep in mind that extending your credit can sometimes lower your credit score. This is just temporary, and it does depend on whether you have to go through a quick check (because you’ve asked for the increase) or not (because you’ve been pre-approved). You will boost your credit score after just a month or so.
What are you struggling with when it comes to budgeting? Do you need help to boost your credit score? Share your needs in the comments below.
Get in touch if you want more help with your finances.