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Credit Cards to Help Build or Rebuild Credit- Quick Guide on How To Build Credit

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Credit cards sometimes have a bad reputation due to the repercussions that come from negligence, but credit cards are actually a great and useful tool for helping you build up your credit score. Maybe you are new to building credit or trying to rebuild a low credit score, a credit card is a great option to utilize as it has a direct impact on the factors that determine your credit score. Here is a quick guide for effective and responsible credit card usage.


Secured credit cards are a great tool for building or rebuilding credit because they require a cash deposit before use. Secured credit cards are a great starting point if you don’t have any established credit or if you have been denied of unsecured credit cards in the past. Secured credit cards are unlike prepaid cards as they give you access to a credit line, and your activity will be reported to all three major credit bureaus. Secured credit cards often offer higher approval odds than unsecured credit cards. The security deposit is usually at least $200 and will serve as your spending limit. You can compare different minimum deposits and fees for your ideal secured credit card.

Use as Few Credit Cards as Possible

It is very easy to take on one too many credit cards due to the easy accessibility of credit cards. From store credit cards to gas credit cards, companies will make great offers and apply discounts to merchandise in order to persuade you to apply. These companies gain more from collecting interest rate money than what they offer you in savings.

It is important to only take on as much credit card responsibility that your budget will allow. It is perfectly fine to stick to one credit card and using that one card effectively. Having too many credit cards can potentially affect your credit report negatively. So, find a credit card company that offers low annual fees and penalties, and regularly utilize that one account.

Pay on Time and Pay in Full

An important aspect of your credit history is paying your monthly bills on time. In addition to auto loans, student loans, and mortgage payments, your credit card payment history is reported to all three credit bureaus. Your credit score is reflective of how well you borrow money and repay it; therefore, paying your credit card on time each month will help improve your credit score. Although credit card companies offer a minimum payment each month, it is best to try to pay the full balance. If you are able to pay in full, you avoid any interest rates added to your account. Paying in full also helps you avoid carrying over debt loads that may become unmanageable over time. Your “payment history” makes up 35% of your FICO score, a type of credit score popularly used by lenders. As you can see, paying on time is essential for building your credit.

Restrict Your Credit Limit

The longer you continue to have a credit card, your bank may automatically raise your credit limit. Calling and requesting to opt out of having your credit limit raised may help you control your spending. If you tend to be an over-spender, you may begin to spend close to your limit. The more credit card debt you collect, it may be harder for you to pay off your balance by the end of the month. Your “amounts owed” makes up 30% of your FICO score. The lower amount you owe helps keep your credit utilization stay low. If you are able to maintain your debt and keep your balance low, you can opt to have a larger credit limit. Always remember that the closer you are to spending up to your credit limit, your credit score may be negatively impacted. The rule of thumb is to keep your used balance close to 30% utilization of your available balance.

Keep Your Credit Card Account Open

Length of credit history accounts for 15% of your FICO score, therefore, maintaining your same credit account(s) will help you build your credit score. This is one aspect of your score that gets better with time. Although it may be tempting to acquire new credit card accounts, remember that having “new credit” makes up 10% of your FICO score.

Applying for any new credit can lower your credit score as most credit applications are considered as a hard credit inquiry. Multiple hard inquiries within a year’s span can negatively impact your credit score. Whenever you decide to open a credit card account, you may want to think twice if you are only opening an account for short-term purposes. It is best to keep your current credit card account open for as long as possible to maximize this aspect of your credit score.

Use Your Credit Card Responsibly

Always keep your monthly income in mind when making purchases on your credit card. You don’t want to spend more than what you are capable of paying off at the end of the month. Also, remember that you begin a credit history when getting a credit card, so be sure to use your card often. You can begin doing this by putting small and recurrent charges on your credit cards such as groceries or monthly subscription services. Try to avoid huge buys unless you have an emergency. If you maintain a low debt, you leave room for emergency expenses. Maintaining responsible credit card habits now will help you obtain a better credit score in the future.