How a Department Store Credit Card Can Help You Build Credit
If you are looking for a quick way to help boost your credit score, consider obtaining a department store credit card. Many people do not realize the benefits that can be obtained by owning a department store card. You can build credit and improve your standing with the credit bureaus.
Pay on Time
One of the biggest things you can do for your credit history is to pay your bill on time. Go out and make a few small purchases on your department store credit card. Then, when the statement comes, pay it as soon as possible. Make sure that you get the payment there in plenty of time to meet the due date.
Over a third of the equation that they use to come up with your credit score has to do with the timeliness of your payments. It is best if you can pay off the entire balance every month. However, if you cannot afford it, make sure to at least make the minimum payment. The minimum is usually low enough that you can scrape it together every month. This is essential to proving to the bureaus that you can meet your obligations.
Keep Low Balances
With your department store credit card comes a spending limit. This does not mean that you should immediately go out and fill your card up to the maximum. In fact, it is to your benefit if you keep from it. Try and keep your balances as low as possible on your card each month. If you can, keep it below about 30% of the total limit of the card. If you continually max out your card or keep it above half the limit, the credit bureaus will dock you because of it. If you want to build your score, keep the cards as empty as possible.
You are continually bombarded for spending accounts at every department store you enter. Every time you check out at a retailer you are now asked if you want to apply for an account. If you join, you will receive a special discount on this purchase and future purchases. While it might be tempting to save $10 on those new clothes, it will actually cost you more in the long run. Chances are you will start to play the credit card game and rack up balances on each of your cards. Then when the bills come due, you have already spent the money.
This is a dangerous habit to get into and can end up damaging your credit rating. It is best to have fewer accounts open at all times. Open only one or two department store accounts. While one account can build credit, five of them can help take it away.
Treat it Like Cash
One of the downsides to a department store credit card is that it allows you to spend more money than you have. Make it a rule that you will only spend what you can afford. If you do not have the cash to pay for the items, do not put them on your card.