How to Build Credit on a Credit Card: 13 Steps (with Pictures) (2024)

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Co-authored byKendra Kinnison, CPA, MBA

Last Updated: October 11, 2022Approved

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   Check your credit report. Request a free copy of your credit report, the compilation of data used to determine your score. Every twelve months, you can get one free report from each of the three major credit bureaus (TransUnion, Equifax, and Experian) from AnnualCreditReport.com. ^[1]

   • Your credit report will tell you your FICO score, which most lenders use to determine whether you are too much of a “risk” or not. These scores are based on your past credit history.^[2]
   • It’s a good idea to space out your credit report requests since your credit score can change quickly. Stagger the reports that you ask for. Request one every four months.^[3]
   • Check it for errors. Be sure that there are no incorrect late payments listed. You can dispute them with the credit bureau if you find errors.^[4]
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   Apply for a card that suits your current score. The most desirable cards require good or excellent credit, so if your score is low, you need to apply for a card designed for people with fair or bad credit. The perks may not be as great, but these are a good place to start improving your credit.^[5]

   • Do your research carefully. Applying for lots of credit cards in a short period of time will decrease your credit score, so don’t apply for one that you probably won’t get. There are dozens of lists of “best credit cards for low credit” online, so utilize those to find the one that’s best for you.
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   Stick with one or two cards. If you already have credit cards open, use these instead of applying for new cards while you’re trying to improve your credit score. FICO scores also take into account how many credit cards you have a balance on. Instead of using lots of different cards, pick one or two (preferably the ones with the best rewards and best interest rates), and use them for everything.^[6]

   See Also

   How to Build Credit | Capital One3 Ways to Build Credit in CanadaHow to build credit: A guide for beginners4 Ways to Build Credit Fast

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   Pay on time. One of the key factors in having good credit is having a record of on-time payments. (This makes up 35% of your FICO score.) If you’ve never had a loan or a credit card, then you probably don’t have any credit at all. Paying for your regular expenses with a credit card can improve your credit if you pay on time every single month.^[7]

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   Pay in full. Credit card interest adds up fast! You only pay interest if you don’t pay your full balance every month. Pay in full every month to not only improve your credit score but also avoid paying interest on the unpaid balance.^[8]

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   Treat your credit card like a debit card. Never spend more than what you have in the bank. Don’t think of it as a loan- think of it as a draft from your bank account. Because the money doesn’t come out of your account immediately, it can be easy to lose track and overspend.^[9]

   • To keep track of what you’re spending, set up an account with a free online budgeting tool such as Mint.com.^[10]
   • Check the balance you owe on your card frequently - at least once a week (or more if you tend to overspend). Some credit card companies will send you the owed balance every day in a text, so check out that option as well.
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   Set up an auto-drafts or payment reminders. Some banks will send you a payment reminder via email or text when it’s time to make a payment. Alternatively, most credit card companies allow you to set up an auto-draft of your payments, so that the money to pay your credit card comes straight out of your checking account.^[11]

   • Again, be careful not to spend more on your credit card than you actually have in your bank account. You don’t want to be saddled with overdraft fees from your bank.
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   Remember that it takes time to improve your credit score. Think of a credit score kind of like a driving record. If you got three speeding tickets when you were 17 years old, your record isn’t going to look so hot in your late teens and early twenties. However, as you get a bit older, if you don’t earn any more tickets, your record will begin to look cleaner, because you’ll have many more ticket-less years on it. Credit scores work the same way. There’s no quick way to fix them, but they can improve dramatically over time.

   • Delinquencies stay on the report for 7 years.
   • Inquiries stay on the report for 2 years.

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   Keep your balance low. The amount you owe on all of your loans and credit cards accounts for 30% of your FICO score. Part of this score is your “credit utilization.” This number is the percent of your available credit that you’re using. If you use a high percentage of your available credit, it’s more likely that you will miss payments. Keeping your credit utilization number low can boost your credit score significantly.^[12]

   • Remember that your credit utilization number can be high even if you pay your credit card bill in full every month. To keep this number low, you can also make payments throughout the month instead of waiting for your statement to come (because credit card companies report the amount listed on your monthly statement).^[13]
   • If possible, try to use 30% or less of your available credit each month.^[14]
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   Pay off cards that are closest to their limits. If you have cards that you’re about to max out, pay those before you pay any of the others. This will help keep your utilization rate low.^[15]

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   Cancel cards with care. Closing your credit cards can hurt your score. Doing so reduces the amount of overall available credit that you have. Unless you’re planning to dramatically cut back your spending, you will be using a higher percentage of the credit available to you, which will affect your credit utilization rate.^[16]

   • On the other hand, if you have a card that’s costing you a lot of money in fees, you might want to close the card, even though it doesn’t look good on your credit report. Consider the pros and cons of wasting money on the fees versus improving your credit score.
   • The average length of all of your open credit accounts makes up 15% of your FICO score.
   • Avoid opening cards just to get the sign-up bonus and then closing them. Every time you open a new credit account, the average length of your credit history goes down.^[17]
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   Don’t forget your open cards! If you have several cards open, you need to use them all, or the company may stop reporting them to the credit report companies, which can negatively impact your score.^[18]

   • If possible, put one or two small recurring payments on each card, and be sure to pay them off each month so that they remain active.
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   Keep your oldest accounts open. Remember that part of your score is based on the age of your accounts. Closing your oldest cards can significantly lower your score, especially if you have a positive history of on-time payments for that card.^[19]

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