Previously it was assumed that getting credit cards was silly. Why would you buy something that you could not afford? Is this not being irresponsible? This seems to be a rational argument until you get introduced into the world of credit cards. Your depiction of credit card users will unravel once you decide you want to purchase a home or property and go to the bank for a loan. No bank is willing to give out money to someone with zero credit card history. If you are smart, you can get a credit card and build your credit score to over 700 within a five-year span. All you have to do it follow these Smart ways to use your credit

Pay Back Your Loan on Time

Your credit card has a score of 300 to 850. You will receive low-interest rates on loans taken if your credit card score is above 740. This works like an exam where those who score the top marks are most likely to get scholarships, which in turn translates in reduced education costs. The cards with a low score indicate the user is more likely to default on a loan given. That is why the users are charged higher rates. In that respect, if you want to invest in a business or real estate, you need to get that high credit score. This gives financial lenders confidence in your repayment capacity and charges you a low-interest rate saving you money.

Calculation of Your Credit Score

The argument in racking up a credit score can easily be misinterpreted as intentionally getting into debt. The aim here is to show banks that you are responsible with the debt you are given and you are responsible enough to pay it back on time every single month on time as agreed. The credit score is calculated on several factors. First, how long is your credit history? It’s better to start racket up earlier than later. Banks also prefer seeing a low utilization rate, meaning you only use a small percentage of that available. The third consideration is your ability to make timely payments. Finally, the banks look at the diversity and mix of credit in your portfolio. This can be different types of loans or credit cards. It demonstrates a high level of financial responsibility.

Getting Started

credit card scoreGo for a secured credit card whose limit is the amount you put down as collateral. If you default in paying off the credit card, they will hold off the deposit. Starting with 300 to 500 dollars is a good way to start. Avoid spending money you would not ordinarily spend when you did not have the credit card. Exercise the same financial discretion you would as with cash. Use it responsibly for 4 to 6 months. The credit card history raked up here can help you apply for an unsecured credit card. Do not worry about the limit you get on the card, and ensure you keep your expenses at a minimal and pay off your dues on time. This will set you on the path to a high credit card store.