Credit Cards How To Use Credit Cards Wisely

What’s the Best Way to Pay When Trying to Improve Your Credit?

Written by Jason Steele

In today’s economy, it’s extremely important to have the best credit you can. Having a high credit score can help you to receive a lower interest rate on a home mortgage or a car loan, and can even result in more favorable insurance rates. And when you are trying to improve your credit, it’s important to consider what the best method of payment is.

How Different Payment Methods Affect Your Credit

Most forms of payment have no effect on your credit. Clearly, your use of cash or checks will not be reported to any of the major consumer credit bureaus, and it won’t impact your credit history or credit score in any way. It’s also a popular misconception that using a debit or a prepaid card will help your credit. When you use a debit or prepaid card, you aren’t being extended any credit. And since your credit history and credit score are designed to reflect your ability to repay a loan, debit and prepaid cards are not included in it.

However, credit cards require repayment and each purchase is considered to be a loan. Unlike other forms of payment, you will always receive a monthly statement when you use a credit card. And each month that you’ve made purchases or have a balance, you will be required to make a minimum payment on or before the statement’s due date. All of these payments are reported to the three major consumer credit bureaus, and your on-time payments will help your credit history and raise your credit score.

In fact, your payment history is the most important factor is used to make up your FICO credit score, representing 35% of your score. But with no payments to make, your debit or prepaid card will not contribute to your credit score.

About the author

Jason Steele

Jason Steele is a freelance journalist specializing in credit cards and personal finance. His work has appeared in many of the top personal finance sites as well as mainstream outlets such as MSN Money, Yahoo Finance, and Business Insider.


    • FICO is used more widely (much more so) by creditors. So, while the Vantage Score (typically found on the free credit report sites like credit karma) is a good gage, it is not the score used for those looking to grant credit.

  • My credit score is in the 5’s, can’t seem to pull it up. I had an annual income of $47,000 but now it’s $18,000 I don’t know how to get out of debt. I have 5 credit cards all maxed out and 2 department store cards which keep incurring late fees, help!

    • I worked hard to pull my credit score up to 686. I just received a huge drop and when I checked it out, an old utility bill was apparently listed as ‘open’ in the amount of $2040. A collection agency listed the bill. However, I entered into a service with Accredited Debt Relief more than a year ago, and they had established a payment plan with this same utility and the paid them 2 installments, the final one due this month. Can I dispute this and have it deleted? It is erroneous.

    • How did you get approved for 5 unsecured credit cards with such a low credit score? You must be old; in your 40’s 50’s and opened up all those credit cards over the course of years.

  • My credit score was 580. Now after one year of issues due to past I. D theft I’ve ended up with a score of 810. Then unfortunately A certain cable company dove into my credit bureau not once but twice two days a part. which I’m aware they are not suppose to do this. Hence hurting
    My score down to 800. credit solutions has helped me beyond I ever could imagine. I’m one happy lady. Thank you again and again !!

  • I had a credit score of 530. Bad marriage was to blame. I couldn’t get credit to save my life. So I did go the secured way and deposited $200. With a 100% on time payments, I started getting letters for pre qualified unsecured credit cards. A year and a half later, I now have 5 credit cards with 100% on time payments. Credit score is now at 733! I would have never believed it, but it’s true. So, my advice to people wanting to REALLY improve their credit score is to listen to the advice of these experts. Thanks again!

  • Bank Debit or Credit? When I use my debit card I usually select credit b/c I don’t like typing my pin at certain places. Is this being reported as a credit card usage, even though its coming directly out of my account?

  • Ever time I have had credit card my credit score has badly dropped. They make it very hard to get out of debt because the interest added on. But my score does slowly goes up without them. I don’t what to be in debt just to have good score. There has to be another way.

  • I read your information all the time, but I’m hesitant to use more credit cards even to consolidate to pay off existing debt. I worry about the “hard inquiries,” the monthly bill and whether or not the monthly expenditure would actually decrease as needed or increase. I thought if shopping for best rates was done for the same purchase, the hard inquiry would show as one incident, such as car shopping. But I see multiple hard inquiries listed for our recent auto purchase on Credit Karma. I don’t want to repeat that with cards. Please advise further.

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