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How can you use credit cards to improve your FICO score?

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Credit card lenders often make decisions on how much credit to offer you based on your FICO score. Most cardholders are told that in order to improve your FICO score you must pay your debt off in full at the end of every month and stay well below your credit limit. Although this is a surefire way to ensure your credit score stays high it’s also a costly method. In this article we’ll walk you through an easy and cost-effective method to improve your FICO score using your credit card.

Why is Your Score Low

The first step to improve your FICO score is identifying why it’s low in the first place. There are two main factors influencing your score.

  • The amount you owe
  • Length of your credit history
  • Credit utilization ratio

Having a lot of debt racked up on your credit card has a negative effect and makes it harder for you to improve your FICO score. This does not mean that you should cut up your card and never look back. You can improve your FICO score by using your credit card more responsibly and paying off the debt every month.

Your credit history also has an effect on your FICO score as credit issuers can determine the age of your credit accounts from it. Credit history is like wine – the older it is, the better it gets. If your credit history is longstanding you are perceived to be more reputable as compared to cardholders with a relatively fresher credit history.

The credit utilization ratio is the ratio of your balance to the credit limit on your account. Lenders can get a lot of information about your credit card habits from this number. It is advisable to keep it below 30%.

Improve Your FICO Score

You can improve your FICO score by signing up for a secured credit card. Those of you who do not qualify for a normal credit card can go for the other most consumer-friendly alternate – make a deposit and sign up for a credit line via a secured credit card. This not only keeps you in the safe zone but also lets your bank and credit issuers know that you are able to pay the debt you accumulate in a month.

Don’t be anxious if you don’t see an immediate increase in your FICO score. Usually, it takes a few months. For the next 6 months, you will have to pay off the debt on your credit card in full every month. This is guaranteed to improve your FICO score dramatically.

Back to a Normal Card

After you improve your FICO score you have the option to go back to a normal card. If you decide to go back to using a normal credit card you can also request your credit card issuer to give you your deposit back. As long as you keep track of your FICO score from time to time you will be able to continue using the normal card.

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