How to Build Your Credit: Everything You Need to Know for Building Credit with a Credit Card
3 min. read
By: FCU Team
Like everything else in life, the journey to better credit happens one step at a time. If you want to raise your credit score, not only do you need to learn new behaviors, but you also have to unlearn harmful financial habits. For members starting their journey with a poor credit score, we know rebuilding can seem like an uphill battle, but below you’ll find helpful tips and tricks for improving your score with a credit card — and all you have to do is take the first step.
Credit Score Overview
Before we dive into how you can start improving your credit score, let’s bring it back to the basics and lay out what makes up a person’s credit score:
Payment History: 35%
Amounts Owed: 30%
Length of Credit History: 15%
New Credit: 10%
Credit Mix: 10%
Insider’s Scoop on Improving Your Credit Score with a Credit Card
It may sound strange to use a credit card to get out of a situation that a credit card may have put you in the first place; however, credit cards can be great tools for rebuilding your credit when used responsibly. We’re going to lay out the guide to rebuilding your credit by using a credit card with care.
1. Get the right credit card
When you have poor credit, it’s easy to wish you could have a clean slate. While you can’t wish away a poor credit score, you can rebuild it with Florida Credit Union’s Fresh Start Credit Card. This card has a lower credit range, from $1,000 to $3,000, and no balance transfer fees, making it the perfect card for members boosting their credit and moving toward a better financial future.
2. Pay all your bills on time
This may be obvious but paying your bills on time is essential to improving your credit score. If you have any accounts that you’re behind on, make it your priority to bring them up to date. Due dates can have a habit of sneaking up on us, so consider setting up automatic payments each month so you don’t have to worry about remembering to pay your bill at the end of a busy day.
A simple way you can start building your credit is to decide to pay for certain items or necessities using a credit card, like at gas stations or restaurants, and then pay off that bill at the end of each month. By paying off your bills right away, you’re demonstrating that you are reliable and, as a bonus, you save on interest. Creditors are looking for predictability and consistency, so if you never borrow any money to pay back, they can't predict how safe of a borrower you would be.
3. Pay in full whenever possible
Paying the minimum payment is a good start, but you should strive to pay back the amounts you owe in full. Not only does it help you save on interest, but it also helps you keep your spending habits in check. When you know you must pay in full at the end of the month, it will help you remain mindful of how much you spend, so you’re never spending more money than you can afford.
4. Maintain a good credit utilization ratio
We know it sometimes sounds like financial institutions are speaking a different language — so what is a credit utilization ratio and how does it impact you? Essentially, a credit utilization ratio is the amount of revolving credit you’re using versus the amount of revolving credit you have available to you. It can also be found by dividing your total debt by your total available credit.
This ratio accounts for about 30% of your credit score, so correcting it is essential when attempting to raise your score. Your goal should be to use less than 30% of your available line of credit, ideally beneath 10%. This means that if your credit limit is $10,000 you should spend less than $3,000.
The Florida Credit Union Difference
No matter where you are in your financial journey, with these tips and tricks from your local credit union you can achieve your goal credit score. Experience the credit union difference this fall at FCU and take the first step to qualifying for your next milestone, whether it’s your first home or your 16-year-old’s first car. If you are ready to get your finances back on track, join our member focused, community proud credit union today.