Wednesday, October 12, 2016

Building credit with credit cards

Let's talk credit. Credit is your most valuable tool. You must have credit.
But what if you don't? There are two groups of no credit:  the young just starting out and the "I had it and screwed it up."

Let's talk to the young just starting out:  my advice to you is remember credit is your best friend trough life. It will make everything more affordable. Take care of it and it will take care of you. So how do you get credit?  I suggest starting with one credit card. If you are in college, it should be fairly easy to obtain a credit card. Look for one with no annual fee. Interest rates don't matter because you aren't going to pay any. Every month, use your credit card for something you would buy anyway--a tank of gas or groceries. My advice is to never go over 1/3 of your credit limit. The key to successfully using your credit cards is to pay them off IN FULL every month. Forget the minimum payment. Pay the full balance EVERY TIME. Never charge more than you can pay off. I had one friend who pause her credit card every day that she charges something. That way she never got more than 1/3 her balance and she always made sure she could pay it off. Until you know you can manage credit cards DO NOT fall for 0% offers. They usually wind up screwing the user because the deals are set up for the credit card company's benefit, not yours.

For those of you who are trying to fix your bad money management, I suggest talking to your bank or credit union. They usually have someone who can counsel you based on your individual situation. Once you get to where you can get a credit card, use it as above. Never use more than 1/3 of the credit available and ALWAYS pay it in full. Never carry a balance.

Many people will telll you that credit bureaus want you to make payments over time, and that is true. But a credit card isn't the best way to do that because the interest is so high. I suggest using the credit card method above to start building your credit. Then see if you can buy something over time. A major appliance, a car, or something else that you don't want to wipe out savings to get. All this will be discussed in future entries.

So follow along and let's see what we can do to get you in financial shape. Please feel free to ask questions and/or suggest future entries.


  1. Patricia have me this advice a few months ago, about using only a third of your available credit. In two months out had paid off in over 7 points of higher credit score. My friend is a genius

  2. Thanks. I try. You were one of the ones who told me to write a book. :)