3 Easy Ways To Build Your Credit Score

The Logic of Money


SEPTEMBER 13, 2019

If you ever want to take out a loan, you are going to need to start to build credit with a credit card now.

If you are just starting with your credit card and want to start building your credit score or haven’t figured out how to spend responsibly with that little piece of plastic, follow these simple and effective tips.

(In another blog, I advocated for making every purchase on your credit card. It’s essentially buying everything at a discount. However, it requires discipline and is not for everyone.)

Remember, building credit is a marathon, not a sprint. It takes time.

1. Never Spend More Than You Have

The single most important piece of advice I can give you is this…

Never spend more on your credit card than you are capable of paying off when your bill comes due.

It’s truly as simple as that. Treat your card as if it’s cash. So many people get a credit card and start swiping away as if it’s not real money.

It’s much easier to hand over that little card than it is a $100 bill, isn’t it?

If you only have $500 in your savings account, then the most you should put on your credit card is $500. If you don’t pay the full balance at the end of the month, you will get stuck paying interest rates between 18-26%. This will NOT help your credit score.

What will help? Making full, and on-time payments every month.

2. Always Pay It Off

The second most important piece of advice I can give is to pay off your credit card balance every. single. month.

Your credit card company will give you options. They will tell you that you can pay the minimum balance, the statement balance, or the current (total) balance. Always choose to pay the current balance.

Your credit card company wants you to pay the minimum payment. If you fall into this trap, the interest will become your worst enemy and you will be buried in credit card debt.

Like I said earlier, making on-time monthly payments it the best way to build your credit.

3. Put Only Absolute Necessities On Your Credit Card

Using this strategy is extremely effective. The first credit card I used solely to purchase groceries. Everything else that I wanted to buy, I did in cash.

If I wanted to go buy a new accessory or gadget, it was much more difficult to hand over cash than it was my credit card. This saved me a lot of money because I stopped buying things I didn’t need.

Don’t fall into the trap of thinking your card gives you access to more money than what is in your bank account. You don’t.

Making necessary purchases on your card and paying them off each month is a great way to start building your credit score. In fact, this is the single easiest way to build credit with a credit card.

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