Surviving through an economic downturn is difficult, there is no question about that. However, there are ways you can do this without cutting up your credit card. Your credit card, in fact, will be your lifesaver for emergency expenses -- if you are able to guard against uncontrolled spending. It is important that you keep a close eye on your free credit score, and make sure that it goes on an upward trend rather than downwards.
Debt to Credit Ratio
There is a financial term called debt-to-credit ratio, which is defined as the ratio of your debt to the total available credit you have in your revolving accounts. If you have an available credit limit of $10,000 and you owe $2500 on your card, you have a debt to credit ratio of 25%. On the other hand, if you owe $8,500 your debt to credit ratio would be 85%.
The debt to credit ratio is a major factor that affects your free credit score. Credit reporting agencies look at how much you owe on all your accounts, as well as your debt to credit ratio. Therefore, even if you pay your bills off religiously and in full every month, if you are near maxing out your available credit that won't look very good to creditors. The lower your debt to credit ratio, the better it will be for your free credit score.
Sub-prime merchandise cards
This kind of credit card gives you a line of credit to purchase items from the company or vendor that gave you the card. Most of the time you'll purchase the items online or through a catalog like Sears, and you'll be required to put a deposit on what you buy and finance the remaining balance.
The advantage of a sub-prime merchandise card is that the total available credit reported on your credit report will increase by the amount of the card's limit. If you keep your outstanding balances low your free credit score will improve, and if you have a good payment history this will lead to your being offered more pre-approved credit cards in the future. All these will have the positive effect of increasing your free credit score.
Piggybacking
Piggybacking, in simple terms, means riding on somebody else's account. Credit cards or accounts usually allow the primary card holder to add on others to the account, known as a subsidiary card holder or authorized user.
If you are an authorized user of a relative's credit card account and that person has a good payment history and credit score, you will reap the benefits of your relative's credit standing because that credit card's payment history will be posted on your credit report. Even if you had a poor history of payment in past on your own credit cards, your free credit score will increase because of your relative's good payment history.
There are many other
ways to improve your free credit score. Our website features practical and valuable information on
how to improve your credit standing, as well as articles that answer
questions you may have about your credit report.
