Some so-called financial advice would suggest that the best way to better a credit rating is to destroy all credit cards and never borrow on credit again. In a world run on the principle of credit, anyone who follows that advice will find it difficult to exist in such an economic vacuum. While curbing one’s overspending habits is certainly a good step in a favorable direction toward developing a credit repair plan or strategy, abandoning the responsible use of credit cards will severely restrict any credit improvement options.
Getting Credit for Good Credit
Any future course through life will involve proper financial management, which in turn opens the doors for effective use and control of debt and lines of credit. Many circumstances arise when the need for good credit cannot be ignored, such as purchasing a new car, or a larger home for a growing family, starting a business, or any unexpected situation that requires an influx of cash. No access to credit will severely limit the possibilities and opportunities. The capacity to borrow is not only important but necessary in today’s world, and so is the requirement to maintain that capacity. It is not how little the credit has been utilized, but how well the credit has been administered through responsible use of credit lines and personal loans repayments that lenders and creditors evaluate. No credit activity will definitely not improve anyone’s credit score.
Low Balance and Low Utilization Policy
Taking on what is called ‘strategic’ debt will significantly aid in any credit repair plan. This method means effective utilization of credit that benefits the borrower’s credit scores, not detracts from it, such as only using two or three credit cards responsibly. Of course, this requires vigilance in keeping timely repayments, as well as maintaining low balances, and more importantly, low utilization ratios. Simply put, a card with a $1,000 limit should not be used beyond 20% of the card limit, or no more than $200. This strategy, over time, will add a positive direction to a borrower’s financial credibility.