When it comes to repairing your credit, it's not something that can happen overnight. Credit repair, especially if you're trying to do it yourself, is a long game.
So, how can a new or current credit card help improve your score? There are two big reasons.
I call this the 30 x 30 rule. Only use 30 percent of your total credit because it accounts for 30 percent of your over credit score. I had personal experience with the power of the 30 x 30 rule. My credit utilization was at 32 percent because of an unexpected emergency. After I paid down just 4 percent of my total credit leaving me at 28 percent utilization my credit score rose by a staggering 31 points. I could not believe it. Moving forward I now always keep my utilization below 30 percent. Although, as a best practice, I almost always pay all of my credit cards off at the end of the month. I like the freedom of not carrying a credit card balance.
With a new credit card, you have a fresh slate with your utilization rate. My best advice for you is to only put small amounts on the card and pay them off at the end of each week. Do not think of your credit card a crutch or free money – that money has to be paid back and sometimes at a ridiculously interest rate (especially if you have fair to poor credit). Use your new card responsibly and it will help you raise your credit score.
If you have a current credit card, work hard to pay it down below the 30 percent utilization rate, and you'll see an improvement in your credit score.
This is a biggie. Your payment history accounts for 35 percent of your overall credit score. Even if you miss one payment, your score could drop several points. I did not test this theory like I did with the credit utilization rates because a missed payment stay on your permanent record for at least seven years. Your first priority when you get paid is making all of your payments on time, every time.
If you're paying your credit card bill every month on time, you'll see an improvement in your credit score over time. The same applies for not making your payments on time. Just a few late payments or consistently late payments can greatly affect the overall health of your credit score.
Credit cards can work for you if you use them responsibly and always make your payments on time. Follow these two simple rules and you'll be well on your way to repairing your credit!