There are a number of different ways to build credit, but none more effective than using a credit card. Payment history on your accounts makes up 35% of your total credit score, while revolving accounts (Credit Cards) make up the next 30% of your credit score. If you do not have a credit card, you are not using 30% of your score because it doesn’t exist to you. On a credit scale that starts at 350, and ends at 850, there is a potential of 150 points by having a credit card. Having a credit card is only half the battle, it must be used properly!
Every single credit card you have should be under 30% of the credit cards total credit limit. That doesn’t mean that paying off your maxed out credit card at the end of the month is beneficial, it isn’t. The credit bureaus only see the balance you have at the end of each billing cycle. So if you carry a $75 on your $100 credit card, you are being penalized for the balance, whether you pay the card off or not. You only need to utilize 1% of your credit line monthly do generate and maintain payment history on your account, so set up a small recurring monthly payment with your credit card and pay the bill once it comes in the mail.
