If you’re looking for a credit card but have bad credit as a result of financial problems you’ve had in the past, there are many things you should think about before seeking out new lines of credit.
There are a number of ways to boost your credit rating so that you can once again qualify for better credit card offers, one of which is to use common sense. If you’re still paying down credit card debts that you’ve had for a while, making sure to send in all your payments on time and in full will go a long way toward increasing your rating. That’s because payment history accounts for 35 percent of your total credit rating, and the only way to maintain or build your credit is meeting all your obligations every month.
Another way to improve your score is to make a more conscientious effort to cut your debt. The amount you owe versus the total of your credit limits accounts for 30 percent of your score, and as such, the less you owe, the better off you will be. There’s a commonly believed myth that lenders want you to owe something on your cards, but it’s not true. The closer your balances are to zero, the better off you’ll be. Experts generally say that you’ll maximize this aspect of your score by carrying balances equal to roughly 10 percent of your limits.
And once you’ve paid off one of those cards in full, you might be tempted to close that account. Don’t. The average age of your accounts is another factor in your credit score, and the longer you’ve had your accounts, the better. In addition, having a number of different credit types—like a car loan, a mortgage and credit cards—will also be counted in your favor.
However, applying for new credit cards and being rejected will provide a temporary drop in your score. That’s because numerous inquiries into your credit history within a period of a few months by lenders is counted against you, because lenders view it as a sign you’re having cash flow problems.
Of course, when building your credit score as a means of obtaining a new credit card, you should consider the effect the account would have on all aspects of your finances.
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