Ditching your credit card, and paying for more of your purchases with cash or debit cards, sounds like a great idea, until, that is, you check your free credit report. That’s because using a credit card responsibly is one of the best ways to build a solid credit score. And today, lenders, whether they’re passing out mortgage, auto or personal loans, rely on those three-digit credit, or FICO, scores to determine not only who qualifies for loans, but how high their interest rates will be. Of course, the key here is to use your credit cards responsibly. Check your free credit report after you’ve run up huge amounts of revolving debt or missed several credit card payments in a row, and you’ll find that your credit will have suffered immensely. A better plan is to rely on all three methods of paying for your purchases: cash, debit cards and credit cards.
Credit Card Use Falling?
There was a time when it seemed as if people were paying for everything with their credit cards. They’d get a hamburger at their local fast-food joint and put it on their plastic. Today, though, that trend seems to be diminishing. A recent survey cited by CBS said that 28 percent of consumers planned to increase their use of debit cards while decreasing the amount of purchases they make with their credit cards. This is a sound financial move. However, it should be noted that credit cards don’t have to be evil. If you use credit cards properly, without running up overwhelming amounts of monthly debt, you can, in fact, boost your credit score.
Responsible Use
Credit Karma, a financial Web site, recently said that consumers who don’t carry at least one credit card have an average credit score of 563. That’s fairly low by today’s standards, and might foretell a struggle for consumers seeking mortgage or auto loans. Consumers who have at least one card and who carry a monthly balance have an average credit score of 689, according to Credit Karma. This score is far more in line with what mortgage and auto lenders are seeking.
Getting your Free Credit Report
If you want to see how your use of credit cards is impacting your credit history, it’s time to order a copy of your free credit report at AnnualCreditReport.com. This site, run by the country’s three credit bureaus – Experian, TransUnion and Equifax – provides consumers one free copy of each their credit reports every 12 months. By ordering these reports, you can see if you’ve used credit cards responsibly. Each free credit report will list any late credit card payments you’ve made. You may discover that your credit cards have actually helped you attain a solid credit history.