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Does Using Credit Cards vs. Cash Help My Credit Score?

You’ve had some struggles in the past in regards to your credit. You’re trying to fix your credit score, but it seems like it’s taking so long! Building your credit score is a lot like building a good reputation. It takes years of hard work. If you have a “bad reputation” you have to work even harder to change people’s minds about you. Just the same, working your way out of bad credit into fair and even good credit is going to take patience and consistency. This can be disheartening news if you have a bad credit score and it’s negatively impacting your life.

If your credit score is less than favorable, you’re probably looking for ways that you can improve it. You may hear conflicting information in regards to the use of cash or credit to help boost your credit score. Credit cards are what got you in trouble in the first place. Now that you’re finally getting out of debt, it seems like a bad idea to put more purchases on the cards. Safe Credit Solutions is here to set the record straight!

What is credit?

Your payment history, credit usage, the number of credit accounts, type of accounts, credit age, and credit inquiries all determine your credit score. A complex algorithm is then used to determine your unique credit score, giving you a number anywhere from 300 to 850. If you have a large amount of debt on credit cards, your number goes down. If you make payments on the number every month, it goes up.

How much can I put on credit cards?

Using credit cards isn’t bad for your credit score. In fact, the opposite is true. Being awarded credit, putting a purchase on a card, and then paying it off actually raises your score. This is only going to raise your score if the third thing is done, each and every month. Too much of a good thing, buying items with your credit card, becomes a bad thing. In general, your lenders and creditors like to see a credit usage less than 30% of your credit limit. This shows responsibility and self-control.

Does cash help?

Any cash purchases you make don’t affect your credit score. That doesn’t mean it should be avoided. Depending on your personal situation, it might be better to operate with cash. For example, if you have high balances on your cards or your interest rate is really high, it’s better to pay for new items in cash and make monthly credit card payments to get your balances down. This doesn’t directly affect your credit score, but limiting your credit usage and paying your balances down is the key to repairing your credit and raising your credit score.

The best way to take control of your credit score is to start good habits today, and by making a commitment to those good habits for years to come. Safe Credit Solutions is here to help!

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