Make your credit card work for you with responsible use

Make your credit card work for you with responsible useSome people with bad credit may want to cut up their credit cards and eliminate all spending temptations, but the truth is, plastic can be good for your FICO score if used properly. According to a report by TransUnion, one of the three major credit bureaus, more than 8 million people chose to go the former route last year, and here is why it could damage your financial ranking.

Having a major credit card in your name is a good sign to lenders, but the trick is not to carry a balance. While it's not always possible to pay the bill in full every month, using 30 percent or less of your limit shows that you can handle your finances responsibly.

There are a couple perks to having a credit card, too. With certain accounts, you can sign up for automatic payments, which eliminates the possibility of missing the due date. Creditors also offer consumer protection, helping borrowers with lost or stolen cards and unauthorized charges.

Responsible use of credit will eventually help those with a low FICO score gradually raise their rank, which will lead to better car loan interest rates and an improved chance of being approved for lines of credit.