How to Build Credit Responsibly
Now for the good news: If you’re just beginning your credit journey, you may have more credit-building options than you think.
Getting approved for a credit card is only the first step. Here are a few recommendations to keep in mind as you begin your credit journey:
- Don’t pay interest.Contrary to popular belief, you don’t need to carry a balance to build credit. So consider paying off your entire balance each month to avoid interest charges.
- Don’t miss a payment.Late paymentscan stay on your credit reports for years and wreck your credit. So do your best to make each payment on time, even if you can only afford the minimum payment.
- Don’t spend too much.While you might be excited about breaking in your new credit card, try not to use more than 30 percent of your available credit. That means if you have a $1,000 credit limit, try not to spend more than $300. Keeping your credit utilization ratelow can help improve your overall credit health.
It’s important to remember you’re not alone. According to the Consumer Financial Protection Bureau (CFPB), an estimated 45 million Americans may not have credit scores. That’s a huge number, and it includes a variety of individual cases. Some people simply have no credit history, while others may have a credit history that’s gone stale or isn’t yet sufficient to produce a score under most scoring models.