Building your credit score with credit cards
Most financial institutions in the Philippines look at your credit score–a number that represents your creditworthiness–if they want to lend you money. Your credit score can also be affected by your other loans, especially banks and other affiliate lending facilities, but credit cards can lend a powerful hand in making or breaking your credit score.
Here are ways on how you can boost your credit score using your credit card:
Pay your credit card bills regularly and in full. Simply paying your credit card bills on or before the due date can have a positive impact in improving your credit score. This shows that you know to reduce late fees and interest charges.
Avoid maximizing your credit card use. Keep your credit utilization low by keeping track of all your credit card expenses. Credit utilization is the ratio of your credit card balance and credit limit. The acceptable level is at 30%. The lower your credit utilization, the better your credit score will be.
Check your credit report regularly. A credit report is a summary of your financial transactions that is sent to the Credit Information Corporation (CIC), and it contains some basic information like your full name, government ID numbers, address, employer, and business information, if you have any. Most importantly, it includes your loan information with lending institutions, banks, and other financial obligations where the CIC is authorized to collect from. You can request for your credit report and check if you have outstanding loans. You can even submit your credit report to other lenders to show that you have been responsible with your payments and that you are worth lending money to.
Use your credit card rewards and perks. Using your credit cards rewards and points don’t necessarily add up to your credit score since they’re not included in computing your overall credit score. But some credit card providers allow you to convert points into equivalent peso value, which can then be used to partially pay for your bills. Other card providers also have cashbacks if you are able to pay your other utility bills using your credit card. These points and rewards can help reduce your credit utilization.
All these benefits make credit cards useful in increasing your credit score. Keep in mind that to increase your credit score, it is always a good idea to pay your credit card bill on time and always in full. A higher credit score means better loans when you need them.
