7 Simple Tips to Use Your Credit More Responsibly

credit card and sunglasses

Credit cards aren’t inherently bad. In fact, building a credit history is usually necessary if you plan to finance a big purchase like a car or home. Use these tips to maintain a good credit score—and keep your loan rates low.

  1. Learn your FICO Score. When you apply for a mortgage or a loan, your FICO credit score determines what interest rate you’ll pay. (FICO is short for “Fair Isaac Corporation.”) This score is calculated by assessing several aspects of your payment history and credit account balances.
  2. Don’t close all of your accounts.Closing your credit card accounts isn’t always the smartest move for your credit. Remember, you are rewarded for credit that’s available to you that you are not using. A good rule of thumb is to learn how to keep credit accounts open without overspending.
  3. Do close accounts with high interest rates or fees. Once you’ve paid off your balances, close accounts that charge annual fees or that have interest rates that are unreasonably high.
  4. Use your credit cards periodically for small purchases. Some credit card companies close accounts that have been inactive for a certain period of time. Set a low dollar limit and use your active cards from time to time.
  5. Use reward cards. Certain credit cards offer rebates on purchases, which can help you save on those periodic expenses you’re charging.
  6. Don’t carry a balance. Pay off your cards in full each month. Or better yet, pay more than the minimum you owe.
  7. Request a higher credit limit. If you’ve been making timely payments, you may have to ask your credit card issuer to receive an automatic increase, which can help improve your debt-to-available-credit ratio.