How a Credit Card can Increase your Credit Score

Just by owning a credit card you would have increased your credit score. This is before you have used your credit card at all. Owning a credit card gives you a status that you would not normally otherwise get. This means that that your credit score will be positive when it comes for putting in for a loan or mortgage.

Another way a credit card can increase your credit score is if you pay your credit card bill on time. By paying your bill on or before the due date, this will enhance your ‘score’ every single time. You will then become known as a ‘trusted customer’ – meaning that your cash limit on your card may be raised in due course.

However, paying your credit card late, will see the APR [Annual Percentage Rate] kick in. This means that not only will you have to pay the original bill in full, but also the percentage rate that your bank or financial provider has placed on your card. This will see you gain a black mark on your name – because of a late payment on your card. And this could affect your financial future – if you wish to loan money, apply for a car, or indeed a mortgage. However, after stating those facts, credit cards increase your credit scores in a number of ways.

What one has to remember here is that each finance lender – be they a bank or another financial institution – has a ‘perfect customer’ wish list. This means that customers must ‘tick’ certain boxes in order to gain ownership of a credit card. If you go to one credit card company and you are rejected, this does not mean that you will be rejected by others. Where one company will deny you a credit card – based on a past late payment – another company will find it perfectly acceptable to put you through.

Profit plays a huge part in all of this. This is not about risk, as one may believe, but it is all about how much income you can make your bank or lender.  If you pay your credit card bills on time and you only apply for cards with 0% interest, then the finance companies do not want to know you. This is because you are not making money for them in the long run.

However, risk does play some part in whether you receive your card or not. No bank or finance company wishes to risk giving you a credit card if you cannot pay them back. So risk does play a big part in the decision-making here. Again, one has to remember that all finance companies and indeed banks are in it for one thing only, to make money. Profits is all that matters and if they feel that they can make a profit from you, then that is what they will do.

If you feel that anything on your credit score file is wrong, you have a right to see it and put it right. By not doing so you will be heading for major rejections in the future. So, if you believe that your credit rating is wrong, then question it and ask to see it. Anything that you find that is wrong, you can then rectify it.

If your cell phone contract address has not been updated – after a house move – or you have not informed certain companies of your house move, then this can affect your credit score. Also, check for products that have been bought in your name, but are not yours. This is fraud [identity theft] and can adversely affect your credit score.

Check every single detail you can to make sure your credit record is up-to-date. Also, put yourself on the ‘electoral roll’ – to show that you at least ‘exist’ and are eligible to vote. This again will improve your credit score. Again, what you have to remember when applying for a credit card, is that not all lenders are the same.

Where you may be rejected by one lender, as explained above, it does not follow that you will be rejected by another. Lenders are looking for different things all the time. This means that it really is worth your while ‘shopping around for the best possible deal you can get, in reference to credit card companies.

At the end of the day a bank or financial lender has to decide whether or not you are going to make them profits. If they decide otherwise, then you will be rejected – no matter how financially stable you may be. However, as explained above, do not be put off by this. There are always other companies that will find you perfectly acceptable and who will put you through for a credit card based on what ‘wish list’ they go by – and also based on what boxes you happen to tick on their ‘wish list’..