How to Use Credit Cards to Build a Credit Rating

Getting a credit card is a key way to build a credit rating. Establishing credit and maintaining a decent FICO score demonstrates a measure of responsibility. And with a high score, you'll qualify for most types of financing, from auto loans to mortgages. Acquiring a credit card is only one aspect of building credit. To achieve a high rating, you'll need to use credit cards wisely.

Instructions

1

Consider your options. Apply for a prepaid credit card or a student credit card to begin establishing your credit history. Contact your bank for information on secured or prepaid cards, or look for student card applications around your college campus.

2

Choose the right company. Prior to applying for a prepaid credit card, check with the financial institution to see if they report activity to the credit bureaus.

3

Use your credit card to pay for inexpensive purchases. Regularly use your credit card for inexpensive or low-ticket items such as fuel for your car, groceries or dining out.

4

Set limits. Keep your credit card balance low by establishing a monthly limit and staying within this limit.

5

Pay off debt each month. Maintain a low debt-to-income ratio and a high credit rating by paying off credit card debt every month.

6

Avoid skipping payments. A good payment history strengthens your credit rating. Pay your credit card on time each month. Avoid late payments and penalties by using online payment forms, or by sending payments at least 1 week before the due date.