Your credit score is one of the most important parts of your financial health. But how can you build or improve your credit score using credit cards?
Well, these plastic cards can be a powerful tool for boosting your credit score when managed correctly. In this guide, we’ll cover practical and simple strategies to use your credit card to improve your credit score.
With these steps, you can build a solid financial foundation and enjoy more control over your future. But first:
Why Is It Important to Have a Good Credit Score?
Your credit score is essentially a record of your financial trustworthiness. Lenders use it to evaluate the risk involved in lending to you.
The higher your credit score, the more likely you are to be seen as a reliable borrower. Having a good credit score opens doors to credit at favorable terms, and it also demonstrates that you’re a responsible borrower.
Without a good credit score, you may struggle to access loans or be forced to accept high interest rates, which can make borrowing more expensive.
And it’s not just big purchases like homes and cars that are affected. Some landlords and utility companies also check credit scores before approving applications, as a poor credit history could be seen as a risk for non-payment.
Proven Strategies to Improve Your Credit Score Using Your Credit Card
So, how does a credit card improve your credit score? Let’s dive into the strategies you can use to leverage your credit card for a stronger credit score.
1. Always Pay Your Bills on Time
One of the best ways to improve your credit score is by paying your credit card bills on time. This shows lenders that you’re responsible with credit and can be trusted to fulfill your financial commitments. A missed or late payment can harm your credit score, so it’s crucial to pay consistently.
Setting up reminders or automatic payments can help ensure you don’t miss any due dates. If you’re worried about a large bill, consider paying smaller amounts throughout the month to avoid a big payment all at once.
2. Keep Your Credit Utilization Low to Improve Your Credit Score
Credit utilization refers to the amount of credit you’re using in relation to your credit limit. Ideally, you should aim to use less than 30% of your available credit. For example, if you have a credit card with a R10,000 limit, try to keep your balance below R3,000 to improve your credit score.
Keeping your utilization low shows lenders that you’re not overly dependent on credit and are likely to manage your finances well. To achieve this, consider making multiple small payments throughout the month or increasing your credit limit without increasing your spending.
3. Make More Than the Minimum Payment
While paying only the minimum payment keeps your account in good standing, it can lead to a cycle of debt as interest accrues on the remaining balance. Making more than the minimum payment — or paying the full balance when possible — helps reduce your debt faster.
This behavior reflects positively on your credit score, as it shows you’re actively reducing your debt. Paying off your full balance each month, if possible, is the best approach to stay debt-free and improve your credit score.
4. Don’t Apply for Too Many New Accounts at Once
While it can be tempting to apply for multiple credit cards or loans, doing so in a short time frame can harm your score. Each application triggers a hard inquiry, which temporarily lowers your credit score.
Opening multiple accounts quickly may also signal financial strain to lenders. Instead, focus on managing one or two accounts responsibly before considering additional credit. Applying for too many accounts may also reduce the average age of your credit history, which could affect your score negatively.
5. Keep Old Accounts Open to Improve Your Credit Score
The length of your credit history contributes to your credit score, so keeping old accounts open can work in your favor. Closing an old credit card account shortens your credit history, which may slightly reduce your score.
However, if an old account charges high annual fees, it might make sense to close it. Otherwise, maintaining it as an open account helps build a long credit history that shows you can responsibly handle credit over time.
6. Monitor Your Credit Report for Errors
You’re entitled to one free credit report each year from the major credit bureaus. Regularly checking your report helps you identify errors that could be dragging your score down.
Mistakes like an incorrectly reported missed payment or outdated personal information can lower your credit score unfairly. By reviewing your report, you can spot these issues and take steps to correct them.
How to Build Credit from Scratch?
If you haven’t held credit in the past, building a good credit score takes time and deliberate effort. Here are a few ways to start establishing credit.
Apply for a credit card with your bank
If you already have a savings or checking account, getting a credit card with your bank can be a great way to build credit as a first-time user. Many banks in South Africa offer beginner-friendly credit cards designed to help you get started. For example:
- FNB’s Gold Credit Card and Absa’s Flexi Core Credit Card are solid options for those looking for a simple credit card with a manageable limit.
- Standard Bank’s Blue Credit Card and Nedbank’s Gold Credit Card also cater to new users with low fees and modest credit limits, so you can build credit without overspending.
- Capitec offers the Global One Credit Card, which features low fees and straightforward terms, making it easy to manage.
These entry-level cards often come with budgeting tools and rewards on everyday purchases, helping you grow your credit score while developing responsible spending habits.
Open a Joint Account
If you’re new to credit, opening a joint account with a spouse or partner who has a strong credit history can be a great starting point. For example, if your partner has a Standard Bank credit card with a solid repayment history, adding your name to a joint account or applying for a joint credit card through the same bank can boost your chances of approval.
Their positive credit record supports your application, making it easier to qualify and start building your own credit history.
Key Takeaway
Improving your credit score through responsible credit card use doesn’t just benefit you in the short term. A good credit score can lead to financial freedom, better interest rates, and access to higher-quality credit products. Over time, this can save you money and help you achieve major financial goals, such as buying a home or starting a business.
Using your credit card wisely can be an excellent way to improve your credit score. Building credit takes time and consistency. With these strategies, you’ll be well on your way to achieving a strong and stable credit profile.