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Use your credit card to build credit and plan for your future.

When it comes to credit cards, there are countless articles available to help you find and apply for the best credit card for your needs. But, what about building and improving your credit score after the application process?

Whether this is your first credit card or you’re trying to build credit, you can improve your credit score as you use your credit card by following these simple guidelines.

Track your budget

The first, and possibly most important, fact to remember about credit cards is that they are not another source of income. A credit card is simply a method of payment, meaning the amount you’re spending comes out of your funds eventually—it’s not “free money.”

Think of your credit card as a debit card that’s inextricably tied your bank account balances. Since its balance isn’t immediately affected each time you swipe, making a budget — and sticking to it — is imperative to building strong credit. Using an app like Mint or EveryDollar is a great way to keep track of your budget and spending.

Pay in full (and on time)

Your payment history makes up about 35 percent of your FICO credit score, meaning making on-time payments on credit lines is one of the best ways to boost your score.

Now, that doesn’t mean borrow as much as you want and make only the minimum payment each month. The best strategy to build your credit with a credit card is to pay off your balance in full every month. Not only does this save you from paying interest, it helps you establish a consistent and proven payment history, showing the credit bureaus you’re a responsible borrower.

Working on improving your credit score? Follow these tips.

Keep your balance low

Credit utilization accounts for another 30 percent of your credit score. Essentially, this assessment looks at the amount you owe on your credit cards as a percentage of your available credit. A higher credit utilization may mean that you’ve spent beyond your means and could miss payments. Put simply, if you want to keep building your credit, maintaining low balances on your credit account can give you a significant boost.

As a bonus step, you can make multiple payments each month as you use your credit card. This way your total balance remains consistently low.

Limit the number of credit card accounts you open

When you’re starting out (and arguably for the length of your credit history), one good card is all you’ll need.

Don’t be tempted to open new credit card accounts to get special offers or free gifts, especially when it comes to store credit card accounts. Most people don’t realize that canceled or closed credit accounts show up on credit reports, and can negatively affect the score you’ve been working to build. Lenders also run your credit score each time you apply for a new account. Your credit score could take a hit with each application you submit. Also, each new credit card you open lowers the average age of your credit history, which makes up about 15 percent of your credit score.

Keeping these tactics in mind can help you use your credit card to build a credit score you can be proud of. Ready to keep learning? Visit our Credit Cards page for more information on making your credit cards work for you or contact your local FAIRWINDS branch.

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