How to Use Your Credit Card to Build Your FICO Score

A good credit score, known as a FICO score, is essential for getting the best rates on loans. If you have bad credit or no credit at all, you can use your credit card to build your FICO score. Remember that a good credit score comes from using credit responsibly. If you abuse your credit, you'll see a drop in your score rather than an increase.

Instructions

1

Check to be sure that your credit card reports to the credit bureaus. Some credit cards, particularly secured credit cards, don't report to the credit bureaus. Check your credit report--you should see your credit card listed as an open account. You can order a free copy of your report through www.AnnualCreditReport.com (see Resources), which is the only official source for a free credit report. Note that there is a charge to find out your score.

2

Pay your credit card bill on time every month. Your payment history plays an important role in determining your credit score. Your credit card company will report if you are more than 30, 60 or 90 days late, which will decrease your score. To improve your credit score with a credit card, you must pay your bill in a timely fashion.

3

Keep a low balance or no balance at all. Another aspect of your credit score is your debt to credit ratio, or debt load. To determine this, divide your current debt by the available credit and multiply by one hundred to get a percentage. You want the lowest percentage possible. By keeping a low balance, you'll improve this ratio, which will in turn help your credit score.

4

Ask the credit card company to increase your limit. Again, the more credit that you have available, the better your credit score will be. If you have been responsible with your credit account, you can ask the company to increase your limit.