Using Credit Cards to Build a Credit Score

Use credit cards properly to build your credit score.

A strong credit history will save you a lot of money over a lifetime. If you have a sparse credit history or none at all, establishing one will help you get better interest and terms on any money you need to borrow. Whether you are still a student, or just have never used credit before, once you understand how to use credit cards responsibly, they can serve as a cornerstone in building a good credit history.

Instructions

1. Open a checking and savings account and show responsibility in handling them to lay the groundwork for getting a credit card. You need money to open bank accounts, as well as to pay credit card bills, so get at least a part-time job if you do not have one.

2. Apply for a charge card from one of the big retail stores. Use the card regularly and responsibly to begin building your credit history. Charge only what you can afford to pay off each month.

3. Obtain your first bank credit card. Keep in mind that the Credit Card Act of 2009 requires applicants under 21 to provide proof of income or ability to pay. If you cannot qualify on your own, ask a parent or relative to cosign or add you to an account, so you can start building your history. Use your credit card and pay on time every single month.

4. Apply for a secured credit card if you cannot get one otherwise. A secured card will allow you to borrow as much as 100 percent of the money you deposit as security. If the bank where you have a savings account doesn't offer secured cards, look on Credit.com or Bankrate.com for ones that do.

5. 

   Apply for a second credit card.

   Ask the bank to change your secured card to a regular one once you have a credit history, and apply for a second card. According to finance author Jane Bryant Quinn, in "Making the Most of Your Money Now," one card alone does not suffice to build a strong credit history.

6. Use your credit cards regularly but meticulously. Pay off the balances each month, as Jane Bryant Quinn recommends. Paying off your credit card balances monthly proves that you can control your finances. Use less than the total credit available on each card. MSN Money suggests using only about 10 to 30 percent of your available credit each month. Always pay your bills on time, and your credit cards will help you build a great credit history.

Tips & Warnings

• MSN Money suggests setting up reminders or automatic bill paying if you tend to forget your bills.

• Do not apply for a lot of credit cards. Having too many cards can hurt you.

References

• MSN Money: 9 Ways to Build Credit from Scratch
• "Making the Most of Your Money Now"; Jane Bryant Quinn; 2009

Resources

• Credit.com
• Bankrate.com