Top Credit Card Tips

As a barometer of your creditworthiness, your credit rating is a valuable component of your financial portfolio. Lenders rely on credit scores to influence their decisions about extending credit to a prospective borrower. When you use your credit cards effectively, you can shape your credit rating by improving your credit score. Establishing responsible credit-card habits is a multitasking strategy that begins simply by paying your bills on time.

Top Credit Card Tips
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Pay Your Bills on Time

Experian®, one of the top three nationwide credit bureaus, places timely bill payments at the top of its list of important factors that can improve your credit score. Lenders want to see if you consistently pay your bills on time as a predictor of whether you are a good candidate for prompt repayment of the credit they're considering extending to you. Late payments of your credit card bills, just like any other late payments, can lower your credit score. You'll also avoid paying late fees and other interest penalties by paying your credit card bills before their due date. If your credit card bill is payable each month when your highest volume of bills or single largest payment is due, such as your mortgage payment, or if your credit card bill is due right before your payday, ask your card issuer if you can adjust your billing cycle to align more comfortably with your monthly cash flow.

Aim for a Low Credit Utilization Ratio

Your credit utilization ratio measures how much credit you're using, which is your outstanding debt, against how much available credit you have. For example, if you have a credit card with an available limit of $5,000, and your balance on that account is $3,000, your credit utilization ratio is 60 percent ($3,000 divided by $5,000 multiplied by 100). Lenders prefer lower ratios than this, optimally 30 percent or less. So if you pay down your credit card to a balance of $1,500, your credit utilization ratio becomes a more-desirable 30 percent ($1,500 divided by $5,000 multiplied by 100). Experian notes that your credit utilization ratio combined with your payment history represent up to a whopping 70 percent of your total credit score.

Keep Your Credit Card Debt Below Your Maximum Limit

If your credit utilization ratio is nowhere near 30 percent or lower, at least try to steer your debt away from perpetually maxing out your credit cards. When your outstanding credit card debt is always at or near your maximum limit, your credit rating will suffer as your score drops. Aim for a methodical repayment plan in which you make more than the minimum monthly payment so you can lower your card debt, even if you can only target one credit card at a time. If possible, set a goal of not using your credit cards until you can move the balances away from the maximum limit toward your ultimate goal of a 30 percent debt-to-limit ratio.

Apply for New Credit Cards Sparingly

Although you'll enjoy an increase in available credit each time you're approved for a new credit card, your credit score may take a hit if you apply for numerous credit cards over a short time period. Each time you apply for a credit card, whether or not you're approved, your credit report generates what's called a "hard inquiry." Sporadic hard inquiries may not lower your credit score, but lots of them probably will.

Monitor Your Credit Reports

Mistakes and oversights happen. If you're taking a proactive stance to improve your credit rating, get a copy of your credit report to check for any errors it may contain. And if you find any errors, resolve them as quickly as possible. The Fair Credit Report Act allows consumers the right to receive three free copies of their credit report each year – one from each of the top three nationwide credit bureaus (Equifax®, Experian and TransUnion®). Request your free copies by visiting, which is the only website that's authorized to provide free credit reports under the FCRA. You can also request your free copies by calling 877-322-8228 or by visiting, downloading the Annual Credit Report Request Form and mailing the completed form to Annual Credit Report Request Service, <st1:address w:st="on"><st1:street w:st="on">P.O. Box 105281, <st1:city w:st="on">Atlanta, <st1:state w:st="on">GA, <st1:postalcode w:st="on">30348-5281.