Having and using a credit card effectively can help build and improve your credit score - that's a fact! However to do so one must be financially disciplined. Simply utilizing a credit card with disregard for paying it off can in fact significantly hurt your credit and as a result you may end up paying higher interest rates. The strategies below will help guide you along the right path:
The best way to build credit is to use your credit card and pay it off fully on a regular basis. This reflects your ability to borrow and pay off debt. Not having a credit card or having one but not using it are not effective strategies if you want to build your credit and have a high credit score.
While making payments on a regular basis can help improve your credit score, making late payments can hurt your score. Make sure to always pay at least the minimum amount by the due date. If you have several credit cards you can set up automatic withdrawals from your account to alleviate the stress of managing payments on multiple cards.
The credit utilization ratio is your balance divided by the credit card limit. Having a high balance can adversely impact your credit score. It is important to note that cancelling existing cards or reducing your credit limit can actually negatively impact your credit score by reducing the ratio. The best way to keep the ratio low is to not rack up high credit card debt.
Every time you apply for a new card or for a credit card limit increase the lender will check your credit report as part of the application, which counts as a 'hard hit'. Having too many hard hits on your credit in a relatively short period of time may have a negative impact on your credit score.