Use card regularly (with a budget)

Using your credit card regularly and responsibly is crucial for building credit. Make small, regular purchases and ensure that you can pay off the balance in full each month. This demonstrates to creditors that you can handle credit responsibly. However, it’s equally important to budget and avoid overspending.

Create a monthly budget, track your expenses, and only use your credit card for planned purchases within your financial means.

Keep credit accounts open

The length of your credit history is a key factor in determining your credit score. Closing old credit card accounts can shorten your credit history and potentially reduce your credit score. Keep your accounts open, even if you don’t use them frequently.

Closing accounts may also impact your credit utilization ratio negatively, as your available credit decreases. Maintain a healthy mix of active credit accounts over time to positively influence your credit score.

Check credit regularly

Regularly monitoring your credit report allows you to catch errors, identify potential fraud, and track your progress in building credit. Obtain free annual credit reports from major credit bureaus and review them for inaccuracies.

Additionally, consider using credit monitoring services for real-time updates on your credit score and any changes to your credit report. Staying informed about your credit status empowers you to make informed financial decisions and address any issues promptly.

Monitor your credit report for accuracy and potential errors. You’re entitled to one free credit report from each major bureau annually. Utilize free resources like AnnualCreditReport.com to track your progress and address any discrepancies promptly. Staying informed about your credit report empowers you to manage your credit effectively.

Building credit with a credit card requires discipline and responsibility. By following these six steps, you can leverage your card as a tool to unlock a brighter financial future. Remember, progress takes time, but with consistent effort, you can establish a strong credit foundation and achieve your financial goals.

Other Ways to Build Credit

If you are not interested in utilizing a credit card but still want to build your credit, there are other options.

Other types of loans

Loans can help you build credit history such as auto loans, home loans, student loans, or personal loans. Similar to credit cards, responsible use and on time payments can facilitate credit building.

Credit builder loans

Credit builder loans are used for people with limited or no credit history. Like a secured credit card, you will make a deposit into an account for collateral and then pay installments on the loan which is reported to the credit bureaus. This can not only build your credit but also boost your savings.

Experian Boost

Experian Boost is a free service by Experian that allows individuals to include things such as bills and utility payments in your credit rating. This could be big for people who are not interested in taking out a new line of credit but still want their credit to benefit from their monthly payments.

Become an authorized user

Becoming an authorizes user can help build credit. When you become an authorized user on someone else’s credit card account, you are granted permission to use the credit card but are not legally responsible for the debt. The primary account holder’s payment history can be reported on your credit report, helping build credit.

Become a cosigner

Becoming a cosigner on a loan or credit application adds you as a second person legally responsible for the debt along with the primary owner. Both the primary and cosigners payment activities are reported to the bureaus. With responsible use and on time payments, your credit score can benefit by being a cosigner.