How to Build Better Credit With Your Credit Cards

Building a good credit score is key to your financial health. It saves you money, increases your housing opportunities and qualifies you for helpful discounts. With national household debt recently rising to $14.3 trillion, now’s the time to strategize for your personal healthy credit development.¹

Of course, one of the most effective ways to build credit is by using a credit card. However, it matters how you use that credit card. Keep these guidelines in mind to make sure your credit cards help (rather than hurt) you and your credit score. 

1. Pay on Time and in Full 

This is one of the simplest, yet most important, things to note. Good credit grows over time, and a vital part of that is creating a good track record with your credit card supplier. Credit history, next to actual credit utilization, is a crucial factor in calculating your credit score. If you always pay fully and on time, you’ll not only establish good credit but avoid having to pay interest. 

Staying on Top of Payments

As vital as it is to make on-time payments, it’s deceptively easy to let the deadlines slip by you. Remember to always start with a budget, making it less tempting to spend money you don’t have - leaving you unable to pay your statement in full. In addition, you can set up reminders or automated payments so you’re never late on a payment. 

2. Always Keep an Account Active

Naturally, your credit history also depends on how long you’ve had a card open.² Ideally, you would open a credit card as soon as possible and keep that card active to increase your average account age. Regardless of when you actually open your first credit card, you can better your credit by keeping that account open or “active.” 

Hopping between credit card suppliers could leave a mark on your credit history and potentially hurt you in the long run. Avoid having to do this by carefully researching all of your credit card options, picking the best card for you and keeping that credit card open for a significant length of time.

3. Don’t Use All Your Credit 

Credit utilization is even more impactful to your credit score than credit history. In essence, credit utilization measures how much of your available credit you actually use. This is typically calculated with a percentage. 

Keep in mind that just because you can spend it, doesn’t mean you should. Using too much of your available credit is damaging to both your credit score and your bank account. Experts suggest not exceeding 30 percent of your credit limit.³

4. Use the Right Card for You

All of these factors can be more easily controlled if you follow this step first: pick the right card for you and your spending habits. Don’t just pick a card because it’s available to you. Evaluate and compare all of your options to better make an informed decision. Some cards, for instance, offer specific perks that may match up with your spending habits. If you spend a lot of your income on travel, hotels or even clothes shopping, there’s a credit card that will complement your expenses. 

The steps to attaining a good credit score don’t have to be a mystery. You can make some big changes by just tweaking your credit card habits. Good credit is built over time, but as long as you use these guidelines as a foundation for your credit usage, you’ll be on the track to better credit. 

5. Check Your Credit Report Annually

It’s important to check your (and your child's) credit report regularly to ensure there are no errors or fraud. ⁴  You can  request a copy of your credit report for free once per year.⁵ The three major agencies are Equifax, Experian and TransUnion.

In the event that you discover an error in your credit report, contact the associated credit bureau and file a dispute. They will be required, by law, to investigate and correct a mistake if they’ve made one.⁶