Building Good Credit Report Scores
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Want to build a good credit report score? Before you think about using a credit card to make that purchase, think twice. Here's some helpful advice for building, and maintaining, a high credit score.
Charge Only What You Can Afford
We have been so conditioned to charging that we don’t give it a second thought. However the principle of building a good credit history and staying out of debt is charging only what you can afford to pay. How much is that? The answer won’t be the same for every person. The amount depends on each person’s income, expenses, credit limit, and credit card balances.
How much you can afford to charge depends on your discretionary income – what you have left after taxes and other necessary expenses have been paid. What you might call your “spending money”. You would use your spending money to pay off your credit card balance, so you should never charge more than you have available to spend.
Gross Income – Taxes = Disposable Income
Disposable Income – Necessary Expenses (rent, utilities, etc.) = Discretionary Income
Your credit report score thrives and will never be better than when you pay your credit cards in full each month. So, if your discretionary income is $1,000, the most you can afford to charge is $1,000. Also don’t forget what you might spend on clothes, entertainment, etc. Most people forget these. Don't charge up more than you can pay off exactly when the bill comes due.
Other Factors To Consider
You should also consider the credit limit on your credit card. Never charge more than your credit limit. The best practice is to keep your credit card balance below 30% of your limit. So, on a card with a $1,000 limit, you shouldn't charge more than $300. This should be your goal if you want to rebuild your damaged credit and improve a low good credit report score.
If you have balances on other credit cards, it’s best to pay off those balances before making any new credit card purchases, especially if you’re already having difficulty making payments. This will prevent your credit report score from dropping due to high balances, and also establish a good payment history on your reports..
Charge Only What You Can Afford
We have been so conditioned to charging that we don’t give it a second thought. However the principle of building a good credit history and staying out of debt is charging only what you can afford to pay. How much is that? The answer won’t be the same for every person. The amount depends on each person’s income, expenses, credit limit, and credit card balances.
How much you can afford to charge depends on your discretionary income – what you have left after taxes and other necessary expenses have been paid. What you might call your “spending money”. You would use your spending money to pay off your credit card balance, so you should never charge more than you have available to spend.
Gross Income – Taxes = Disposable Income
Disposable Income – Necessary Expenses (rent, utilities, etc.) = Discretionary Income
Your credit report score thrives and will never be better than when you pay your credit cards in full each month. So, if your discretionary income is $1,000, the most you can afford to charge is $1,000. Also don’t forget what you might spend on clothes, entertainment, etc. Most people forget these. Don't charge up more than you can pay off exactly when the bill comes due.
Other Factors To Consider
You should also consider the credit limit on your credit card. Never charge more than your credit limit. The best practice is to keep your credit card balance below 30% of your limit. So, on a card with a $1,000 limit, you shouldn't charge more than $300. This should be your goal if you want to rebuild your damaged credit and improve a low good credit report score.
If you have balances on other credit cards, it’s best to pay off those balances before making any new credit card purchases, especially if you’re already having difficulty making payments. This will prevent your credit report score from dropping due to high balances, and also establish a good payment history on your reports..
