When you’re working to build or rebuild your credit history, how you use credit is everything. It’s important that you build the right credit habits to build and maintain a good credit score.
Unfortunately, credit cards don’t come with manuals for wise use. You may have already learned the hard way about the devastating effects of credit misuse, but it’s never too late to start over.
Starting Out
Start out slowly. Make small charges on your credit card and pay the balance in full each month. The goal isn’t to use your credit card to buy things you don’t have the cash for, but to begin building a good credit history and instill good credit habits.
One way you can get used to your credit card is to use it to pay a small monthly subscription or other recurring bill, something around $20 or less, and pay it each month. Let this be the only charge you make with your credit card for at least six months. This will get you in the habit of staying below your credit limit and paying your balance in full every month - two habits that will have a positive effect on your credit score.
Taking the next step
After you’ve gotten into the habit of paying your bill in full, you can begin using your credit card to make small purchases. Continue to keep your balance low, 30% of your credit limit or less. That means your balance should never rise above $30 on a credit card with a limit of $100. When you make a credit card purchase, put the money aside immediately so you won’t spend it before your bill comes. Then, when it’s time to pay your credit card bill, you already have payment.
As you use your credit card the right way, your creditor will likely increase your credit limit, allowing you to charge more on your card. Continue to stay within 30% of your limit even as your limit increases.
Tips
- Putting good credit habits into action takes self-discipline. You’ll have to tell yourself “no” when you want to use your credit card to make a purchase but can’t pay your bill in full at the end of the month.
- When you put money aside to pay your credit card bill, make sure you don’t spend it on something else.
- Most credit cards allow you to view your account activity online. If your credit card gives you this ability, sign up so you can monitor your credit card balance and pay your bill online.
- Start out with just one credit card, so you can keep your payments manageable.
- Stop credit card offers so you won’t be tempted to open new credit cards.
- There may be months that unexpected expenses keep you from paying your balance in full. During those months, make at least the minimum payment and don’t increase your credit card balance by making more credit card charges.
- If you know you don’t have the money to pay your credit card balance, put the card away. Don’t use it until you can afford to.
Dos and Don'ts of Using Credit Wisely
How Many Credit Cards is Too Many
Opt-out of Credit Card Offers
Five Principles of Making Credit Card Payments
Build a Good Credit Score By Charging Only What You Can Afford
