Everybody has a Credit Score. That is what financial institutions look at when you approach them for a loan to buy a car or a house. It naturally follows that it is very important that you have a good Credit Score.

So what is a Credit Score?

Investopedia defines a Credit Score as “a statistical number that evaluates a consumer's creditworthiness and is based on credit history”.

A Credit Score is usually a three-digit number and the higher it is, the better your score.

A person with a good Credit Score stands a much better chance at securing loans and it influences the amount they pay back on borrowings. So it is important for a person to have a good Credit Score.

Credit Cards and Credit

Credit Cards can help you build your Credit Rating. This happens when you can demonstrate that you can use the credit assigned to you, responsibly. And how to do that? All you have to do is use your Credit Card each month in moderation and pay off all your purchases in one shot, on time.

This is not the only way. You can keep your Credit Card locked up in a drawer and your Credit Score would still improve!

In other words, just having a valid Credit Card is the easiest way to build a Credit Score. Let’s find out how.

Ways to build Credit with a Credit Card

Buy and Pay on Time – When you charge purchases on your card, and then pay it off on time, it clearly demonstrates that you are responsible, that you can handle debt properly and that you can adhere to re-payment schedules. And instead of not using your Credit Card at all, it is good to use it – although sparingly – and pay it off in full before your payment is due. Never late.

Keep but not use a Valid Credit Card – By getting a Credit Card and not using it at all, it shows that you are not desperate for credit. This builds up your credit rating – although not as quickly as the person who has and uses his Credit Card, and pays the due in full on time.

Have a good Payment History – Your payment history is a record of how you have been paying for all the purchases you have done on your Card. If you have a history of late payments and delinquency, then your rating goes down. And this has an impact on your Credit Score for several years. So the best thing you can do is to set automatic payments on your Credit Card so you never miss a single payment.

Summing it all up, here are some important pointers to keep in mind so your Credit Card can have a positive effect on your Credit –

After getting your Credit Card, use it responsibly to make your Credit Rating soar. This will come in handy at times of need, for example, when you are in need of and wish to apply for a loan.
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