Using your card responsibly is key when using a credit card to build credit. A pattern of using part of your credit limit and paying off the purchases will go a long way in raising your credit score.
Keep charges minimal to keep utilization rate low
A good rule of thumb is to use less than 30% of your available credit to keep your credit utilization ratio low. For example, if your credit limit is $500, you should keep your balance under $150.
Make payments on time
Making on-time payments is one of the simplest things you can do to build credit. Set up an automatic payment or monthly reminder on your phone so you’ll never miss a payment — this also saves you from paying a late fee and interest.
Pay your balance in full each month
Pay your full statement balance on, or before, the due date. When you only make the minimum payment, you risk paying a large amount of interest and getting stuck in a debt cycle.
Only apply for a credit card when it’s truly needed
Every application for a credit card creates a hard inquiry on your credit history. This lowers your credit score by a few points each time and stays on your credit report for two years. Too many hard inquiries in a short amount of time can be a red flag to lenders.
How many credit cards to build credit should you have?
Start with one good credit card to build credit, then add a second card that earns rewards once you’re sure you can use credit responsibly. Try to stick with just a couple cards; having many credit cards makes it difficult to manage your balance and payments, increasing your risk of getting into debt.
