How Your Cellphone Can Help You Build Credit

Mobile alerts from your credit card issuer can do much more than alert you to possible fraud. You can use that information to help you improve your credit.

First, a word about how credit scores work. The two biggest factors are paying on time (35%) and the amount of credit you use relative to your credit limit (30%).

And mobile alerts can help you with both, by reminding you when your payment is due (you can choose the number of days in advance; some default to five) and when you are approaching your credit limit.

If you are certain there will be enough money in your checking account to cover it, you can automate the payment to be sure you will never be late with a payment. Whether you do this or not, it’s smart to go over your statement carefully, looking for any charges you don’t recognize. Those could suggest fraud and should be investigated. Identity theft experts recommend you check your accounts every day. Checking often will also keep you aware of the amount owed, so the bill won’t come as a shock.

Second, you can set up a mobile alert for spending limits. Under one of my cards, there is an “approaching limit” choice, and it can be customized to any amount you choose. If you have several choices of cards with available credit, you could set this low — at, say, 10% of your credit limit, so that you get an email or text letting you know you’ve reached that. At that point, you could choose to pay what you owe, so that you once again are at 0%, or you could switch to a card that has a lower balance, relative to its limit.

Finally, you can use credit alerts to help you catch credit card fraud faster. You can set up the alerts so that you get an email or text if there is a “card not present” transaction, a foreign transaction, or if there is a charge above an amount you designate as a maximum for a single purchase. While this will not directly benefit your score, it may prevent your score from dropping because of fraudulent transactions.

Not sure what your score is? You can’t monitor it unless you know. Some credit card statements now come with a score, and you can also get two scores for free, updated every 14 days, from Credit.com. You’ll also see personalized “grades” showing how you’re doing on the factors that go into your score. One caution: When looking at your scores, be sure you compare the same score and scale each month to keep track of your progress. Scores fluctuate, and a few points up or down shouldn’t be of great concern; the trend is far more important.