How to Build Credit With Credit Cards

Your credit score, also known as your FICO score, is calculated with an algorithm created by the Fair Isaac Corporation using information from your credit history. The algorithm is not released but the components are. Your score is based 35 percent on your payment history, 30 percent on the amount of money you owe, 15 percent on how long you've had credit, 10 percent on how much credit you have recently applied for and 10 percent on the types of credit you've used. Having a credit card can help you improve several of these categories.

Instructions

1

Make your payments on time. Even if it's only the minimum payment, each month you make an on-time payment improves your credit history.

2

Keep your balances low. Your credit score will be lower if your card is close to being maxed out.

3

Keep unused accounts open. Even if you do not use the account, it is still reporting that your account is current and that you have available credit, which increases your overall credit score. It also shows that you have been using credit for a longer period of time.

4

Limit the number of credit cards you apply for, especially if you are considering applying for a mortgage or auto loan soon. Each time you apply for a card, an inquiry is noted on your account that remains there for two years and reduces your score.

5

Cosign a credit card with a parent or friend with good credit. If you cannot get a credit card on your own, find someone to cosign for you or to list you as a user on her credit card. Even if you do not spend any money using the card, you can still get credit for being current with payments. This will help build your credit so you can get your own card.