How to Effectively Build Credit with a Credit Card

Building your credit is important if you want to secure a favorable loan for a home, car, or other big-ticket item. If your credit score is lower than it should be to help you get the financial gains you want, there are several ways to bump it up. The following methods will help you increase your credit score when using a credit card. 

Know your numbers  

Although credit reports are not exciting to read, they hold vital truths about your financial health. It is important to review your credit history to spot any irregularities or mistakes that may be working against you. It is also important to find out what you are doing right with your money management.  

Pull a copy of your credit report from each of the three major national credit bureaus: Equifax, Experian, and TransUnion. You can do that for free once a year through the official annual credit report website. Then, review each report to see what’s helping or hurting your score. 

Be intentional with paying your balance  

Paying off your balance in full is an amazing feat, but paying it off before it’s due can work wonders on your credit score. Since your credit score is calculated after your balance is reported to a credit bureau by the card issuer, the lower your balance, the better your credit utilization will be.  

A simple way to do that is to pay down the balance before the billing cycle ends or to pay several times throughout the month to keep your balance low. 

Stay within your limits  

In addition to paying your bills on time and your balance in full, you need to stay within spending limits to protect your credit score.  

Using more than 30% of your credit risks damage to your score. Keeping utilization between 1% and 10% will help your score the most. And, of course, don’t spend beyond your means, regardless of what your limit is. 

But ask for a higher one, too 

You can decrease your credit utilization percentage, even without changing your balance, by increasing your credit limit.  

If your income has gone up or you’ve added more years of positive credit experience, you may have a decent shot at getting a higher limit. 

Prioritize rewards in your credit card choice  

There are many credit cards to choose from, but one that offers rewards will serve you better. Every time you swipe or hand over your card to a retailer, you are showing the issuer that you are an active participant in the relationship. 

If you opened a rewards credit card, start using the card to make purchases that will earn points, miles, or cash back. Little or no activity could result in the bank reducing your credit limit or closing the account, and your credit score could drop as a result. 

These tips will help you build credit when you use a credit card.