How do I build my credit with a credit card?

Money Management
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Hey, I need more information on how does building credit with credit card works? I never understood it. What does it mean to only spend 30% off the card? If that makes sense. Anyone with accurate info about this would be greatly appreciated.

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Hi @swayla.monche!

We published some articles on The Penny Hoarder that breakdown exactly how to use a credit card and how it improves your credit score. I’m including those articles below, so you can take a look.

5 Steps to Building Credit and Staying Out of Debt With Your Credit Card

This article outlines how to use a credit card to build your credit. Tip #4 outlines a little bit about the credit utilization score.

Dear Penny: I Have No Credit History. How Do I Get Started?

Here’s a Dear Penny Q&A about how to get started with building credit when you have no credit score.

These 5 Factors Are What Actually Matters When It Comes to Your Credit

This article outlines the five factors that affect your credit score. #2 goes a bit into the credit utilization report (including that ~30% guideline you mentioned).

Credit Utilization: What It is, How to Track It and What Experts Consider The Best

The above goes more in-depth into credit utilization.

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Swayla Monche posted:

Hey, I need more information on how does building credit with credit card works? I never understood it. What does it mean to only spend 30% off the card? If that makes sense. Anyone with accurate info about this would be greatly appreciated.

Simply put, use the credit card, make payments on time and keep the credit utilization under 30% of the credit limit. The longer you do this the higher your credit score will go.

Credit scores are based on several factors, on time payments, available credit and credit usage are 3 of them (there are more, age of credit, type of credit, etc).

Basically, if you have a card with $1000 limit, use up to $300 of it and try to pay it off every month (or at least make the min payments on time). It’s not a fast raise, it takes time, so you might not see results for 6 months of longer.

Good luck!

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