MYTH: CARRYING A SMALL BALANCE ON CREDIT CARDS SO, WHAT'S TRUE ABOUT SCORES AND HOW TO BUILD THEM? A few time-tested strategies will help you build your credit. Here’s how to focus your actions on the scoring factors that matter most. Pay on time every time Paying bills on time is essential for building credit or maintaining strong credit because payment history is the single most important factor in credit scores. In fact, a payment 30 days or more past due can drop a good credit score 100 points. If you’re finding it hard to manage multiple due dates, try automating your payments — or at least minimum payments — so you don’t miss one. Use credit lightly Using a maximum of 30% of your credit limits is another key for building a strong credit score, although remaining under 10% is ideal. Stay on top of your credit usage by keeping your credit limits in mind as you spend. Two strategies that can help you stay below 30% are tracking your spending and setting balance alerts. Requesting a credit limit increase is another option to consider. Pay off card balances in full each month Paying off your credit cards every month saves you in interest and may help keep you from overspending. If paying off your balance once a month proves difficult, try making smaller payments a few times a month. Keep your oldest credit accounts open The longer your credit history, the less risky you seem to potential lenders. Keeping your older credit accounts open is a great way to show you have a long and established credit history. If you’re new to credit, you can ask to be added as an authorized user on someone else’s credit card account. Choose someone who has an established account and an excellent credit score. That person’s account history and credit limits will be added to your credit reports.

The article Building Your Credit: Myths and Reality was originally published on NerdWallet on October 13, 2021.

AMANDA BARROSO is a consumer credit and debt writer at NerdWallet.


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