No matter the economic climate, a strong credit score can be an integral part of staying financially secure. For many service members, determining exactly what has an impact on their score can be a daunting task.
One thing is for sure: credit cards can and do impact your credit score -- positively or negatively -- depending on how you use them. In fact, credit cards can be one of your best friends when it comes to your credit score.
So, how can you make your plastic work for you in your quest for strong credit?
Here are four important tips from Navy Federal Credit Union on how to put your credit card to use:
1) Credit scores are affected by the “available credit” on your credit card, so be careful not to run up your balance. It’s easy to swipe when credit is readily available, but maxing out your credit card leaves you with debt to pay off and affects your debt-to-credit ratio, which will hurt your credit score.
Experts differ about the ideal ratio, but all agree that keeping your debt below 30 percent of your available credit line is key to ensuring your credit score isn't negatively impacted. Instead of putting everything on your debit card, move specific purchases to your credit card.
For example, always use your credit card when you're at the commissary. That way you can keep up with your grocery budget, and you know you're always using and paying down a specific amount each month.
2) To put a finer point on number one, pay off your balance every month. Doing this will save you money in interest payments. However, if you do need to carry a balance from time to time, look for a card with a low APR. Navy Federal just lowered rates across all of their credit cards, making it a great place to find a card that’s right for you.
3) If you can’t pay off your balance in full, pay as much as you can -- and definitely pay more than the minimum payment due. Doing this will apply more of your payment to the principal amount owed, helping you pay off your balance sooner. Also, be sure to check to see if you qualify for any special pays or incentives, as you may have more options in regard to bill pay and could pay down some of your credit card at once.
4) Finally, pay your bill on time. This may seem like common sense, but making payments on time will ensure you avoid late fees. Additionally, credit card issuers are allowed to increase your interest rate if you get behind on payments, which could mean you end up paying even more over time. If you think you’re going to miss a payment, be sure to talk to your financial institution about your options as they may vary.
Related: Click here for more information on how to put your credit card to use.
Bonus tip: Be smart about opening and closing accounts. As a general rule, avoid closing any credit card accounts. Having a higher average age on your credit accounts positively impacts your credit score. Also, try not to open a large number of credit cards in a short span of time. Doing so can indicate to lenders that you are overly eager for credit.
Just remember that credit cards are one of several tools in your tool belt when it comes to building that solid credit score. Following these tips should make you a savvy credit card user and help you sustain – or even increase – your credit score over time.
Sponsored: Learn more about Navy Federal’s Platinum Mastercard®.