Protect Your Credit Score by Avoiding Traditional Credit and Using a Green Dot Credit Card

Like many things in life, it's easier to ruin your credit score than it is to improve it. Because credit bureaus are often tight-lipped about the exact actions that impact credit ratings, many consumers aren't even aware of how their financial choices affect their credit. While some experts say that you need a credit card in order to build a credit rating, there are plenty of other ways to improve your score. Likewise, there are plenty of reasons to avoid getting a credit card. Opting for an alternative like the prepaid Green Dot credit card allows you to avoid the high balances and late payments that can destroy your credit rating. Here are five things you need to know in order to protect your credit score.

1. Applying for New Cards Can Hurt Your Credit
Many consumers are completely unaware of the fact that applying for new credit cards can lower their credit scores. Whenever you fill out a credit application, the loan provider requests an inquiry into your credit record to determine if you qualify for the card. Even if the card application ultimately ends up being denied, these inquiries can adversely affect your score. Fortunately, prepaid alternatives like the Green Dot card don't require a credit check. This gives you an option that can be used just like a credit card without submitting to the credit approval process.

2. Alternative Ways to Build Your Rating
People who avoid credit cards because of the high interest rates are often mistakenly told that credit cards are necessary in order to build a credit score. This popular myth has unfortunately persuaded many consumers to get cards they don't need. There are other ways to build a good credit score, such as regularly paying on a car loan. Avoiding debt is a great way to build your credit, which makes a prepaid choice like the Green Dot credit card a natural solution for your financial needs.

3. Avoid Carrying High Balances
Credit bureaus also consider the actual amount of debt you carry among your cards. Whether or not your total debt will affect your credit score is dependent upon the ratio of your balance to your available credit limit. This ratio is based upon all the cards you carry, so be sure to calculate your combined debt and combined credit limits.

4. Late Payments Can Sink Your Score
Naturally, making a late payment on your credit card can be detrimental to your credit score. Because credit ratings are designed to determine your financial responsibility, lenders frown upon seeing a late payment. Though you can build your credit rating over time by making prompt payments each month, missing the date just once or twice can quickly destroy your efforts. For many consumers, it's safer to avoid payments and late fees altogether by using a prepaid card like the Green Dot credit card.

5. Falling into Debt is Easier Than You Think
With the best intentions of protecting their credit scores, many consumers commit to paying off the full balances of their cards each month. While this is a good strategy to maintain your credit score, it's a difficult commitment for most people to keep. Swiping your card to make an impulse purchase is all too easy when you know that you don't have to actually pay for the item until the bill comes around. However, when the bill finally arrives, you still might not have the money. Fortunately, you can also use the Green Dot credit cards to avoid this dangerous dilemma. Putting money on the card in advance makes it easier for you to avoid getting into debt and helps you to protect your credit rating.

Why Protecting Your Credit Score is Important

Some consumers choose to ignore both credit cards and their credit ratings, choosing to shop exclusively with cash. While this strategy can help to keep you out of debt, it puts you in a poor position if an instance ever arises where you do need a loan. No matter what type of financial situation you have, it's essential to do all you can to protect your credit score so that you'll have a good rating when the time comes around. A solid credit score can help you to get a lower interest rate on financing for a mortgage or new car. By avoiding new credit cards and using a prepaid card, you can protect your credit rating for the times when you'll need it the most.

Steve Jacobson writes about many different financial topics including, debt, investment, credit cards, Green Dot credit cards and more. Always looking for the best prepaid credit cards and rates, Steve usually uses http://www.creditcards.com/credit-cards/green-dot-prepaid-mastercard.php as a recommendation for those looking for a great alternative to credit cards.