Bottom line:
- Use your card only for purchases that keep you within a monthly budget.
- Always pay your balance on time and in full.
- Building good credit takes time and consistency; there are (alas) no shortcuts.
- Late, missed and partial payments lead to fees that hurt your credit.
- Don’t wait to ask for help if you’re falling behind on payments.
Making sure your credit card is establishing solid credit for you over time is a lot more straightforward than you might think. Two simple habits will help ensure your card puts your financial goals, whatever they might be, within reach:
- Use your card only for smaller purchases you know you can pay off each month. A credit card is nothing more than a very short-term loan that, if you manage it well, has big long-term benefits. Thinking of it that way can make it easier to forgo unnecessary spending.
- Always pay on time, in full. Paying off your entire monthly balance by the due date is the single best tactic. You won’t get caught in a web of fees and penalties and your credit score will continue to climb.
5 ways to protect your credit
Consistent, responsible use of a credit card is one of the fastest ways to build credit. Doing so not only translates to lower interest rates on car loans and mortgages but can make it easier to rent an apartment or house, find lower-cost insurance, and forgo a utility deposit. It can help you pass a background check for a job, too.
In addition to paying your balance off in full, on time, every month, here are some simple “dos” that will help you build a stellar credit score:
- DO choose an easy-to-manage card, meaning one with a credit limit you won’t max out, a lower interest rate (more on that below), and no or low annual fee. While credit card rewards can be a nice bonus, the simplest perk for most people is cash back.
- DO know your APR. Your card’s APR, or annual percentage rate, is the total amount of interest you pay every year for borrowing money through your card. While it’s important to understand this number, if you pay off your balance on time every month, you won’t need to think about APR at all.
- DO use the tools. Setting up automatic payments and account alerts and reminders is the fastest, easiest way to stay on top of spending and ensure you never miss a payment.
- DO stick with one card. You might think that opening multiple cards is a quicker path to establishing credit, but lenders don’t see it that way. They really just want to know how well you pay your bills over time. In fact, if you want to boost your credit score, you’re better off applying only for the credit you need and never going over your card’s limit. (Pro tip: Keep your balance under 30% of your card’s limit.)
- DO ask for help as soon as you need it. Establishing good credit, reining in spending, and building consistency into payments are all skills many people need help with. So whether you want to find a credit card that makes sense for your lifestyle, need help creating a repayment plan, or are simply seeking sound financial advice, CEFCU has the expertise to support you in reaching the goals that matter most to you.
Explore more about credit cards
Learn more about applying for a CEFCU credit card and explore these resources that help answer common questions about credit cards and building good credit:
►How do credit cards work?
►What’s the best first credit card for me, and how do I get started?
►What happens if I can’t pay my credit card, and how bad is credit card debt, really?
►Are credit card rewards actually worth it, or is cash back better?
