Increasing Your Credit Score; Step 2

Please see the first part of this series: Step 1 here.

We learned in my last post in this series that the first step to increasing your credit score is to "Get Credit". The next step is:

2. Spend 40% of credit limit

Once you have gotten a credit card, you will need to go ahead and spend 40% of the credit limit and NO MORE than that! Also you must have this amount in your bank (checking or savings) to make sure you will be able to pay the card off in full in case of emergencies that may come up.

If you are the type of person who can not be trusted with a credit card, have a family member or a trusted friend do this for you! Don't risk yourself getting in debt and not being able to pay off the balance on the card. The whole reason for this series is ways to increase your credit score. If you are in debt up to your ears.......WORK ON GETTING DEBT FREE first.

Now, you have 40% of your credit limit spent, do not put anymore on the card. Why? If you carry balances at 50% or more of your credit limit it will decrease your credit score and you always want to keep any credit cards you have at 40% or lower of the limit. Keeping it at 40% allows for increases from interest, which you really won't have to worry about, but for less risk it is best to do 40% (although you can do 45%, I just don't recommend it).

What could you buy to reach your 40%? You could put your rent, electric bill, phone bill or groceries on the card. Just something to spend that 40%.

Here is a scenario to make sure everyone understands what this means.

You get a credit card with a $1,000 credit limit. Your purchases should total no more than $400 on that card. That is 40% of your $1,000 credit limit.

Does everyone follow me now? If you have any questions about Step 1 or Step 2, leave a comment below or email me at:

thefrugaladdict@gmail.com

Step 3 here.