Debt Money

How To Responsibly Build Credit

February 15, 2016
Don't have any credit? Want to build it responsibly so you don't have to endure the headache of fixing it later? Well, this article will help you responsibly build your credit.
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Learning how to responsibly build credit is an essential component of any financial plan. I never understood the importance of it until $34,420 worth of credit card debt stood between me and my sanity — and more importantly, my dreams. Take it from someone whose credit has been shot to hell and back, it is critically important you responsibly build your credit.

Take it from someone whose credit has been shot to hell and back, it is critically important you responsibly… Click To Tweet

Some of you may be like me — you were never taught the value of credit, nor how to properly manage it. I’ve learned everything I know from my own personal experience and self-education. If you didn’t receive proper education on how to responsibly build credit, there are several tools available to you online, but I want to give you a few pointers based on my own experience. With this being said, let’s get into a few ways you can responsibly build credit.

Don't have any credit? Want to build it responsibly so you don't have to endure the headache of fixing it later? Well, this article will help you responsibly build your credit.

1. Don’t use your credit card for wants (at first).

Practice self-discipline before you go charging vacations and Michael Kors purses on your credit cards. I know the purse is cute and the vacation with your friends this summer will be one to remember, but if you haven’t saved for it — you can’t afford it!  

Putting it on a credit card is the last thing you want to do if you want to responsibly build your credit. Use the card for your budgeted needs only. If these items are already accounted for in the budget, use your card to make the monthly purchase. By doing this, you will be able to pay the card off in full each month.

2. Build credit by using a credit card to pay a small monthly subscription.

If the thought of paying all of your bills and basic needs on your card every month makes you break out in hives, start smaller. You can put a small monthly subscription, like Netflix, on your card each month. Once the small amount has posted to your card, schedule an auto-payment for the full amount from your checking account within a few days of the posting to ensure you’re not charged any interest.

3. Pay more than the minimum on larger balances TWICE per month.

If you decided that listening to me (the reformed credit card addict) isn’t necessary and want to go ahead and charge your vacation on your credit card — I hope you have a plan to pay it off! If not, I encourage you to pay more than the minimum because I’m positive you don’t want to pay for this vacation the next 6 to 7 years. Even more, I’m certain you don’t want to pay an exorbitant amount of interest on it either. If you can swing it, make two large sized payments every month (at least double the amount of the minimum payment).

4. Search for your own credit opportunities versus using the credit offers that come in the mail.

The offers that come in the mail are rarely in your best interest. These companies want your money and they know how to create great copy that will get your attention and make you feel all warm and fuzzy inside. If you really want to get the best rates and conditions, search for your own credit offers. You can start with your own bank or search for credit cards suitable for your credit rating.

5. Know your credit score and what’s on your report.

These days it’s easy to find out your credit score. Many credit card companies offer this information for free to their cardholders. By knowing your credit score, you will be empowered to seek the best deals if you’re ever in need of a mortgage or auto loan. Check your credit report for free once a year for any discrepancies. If anything looks out of place, dispute it right away.

There is a FREE website that allows you to obtain your credit score from one of the credit reporting agencies. Sign up for Credit Sesame today to see how your credit is holding up. This site provides recommendations and great information on how to keep your credit score on the up and up.  Again, it’s free unless you’re interested in the I.D. theft protection – which I highly recommend by the way.

6. Build credit by maintaining a proper credit utilization ratio.

Your credit utilization ratio is an important part of your credit score. It makes up 30 percent of a score and can be determined by dividing your total debt by the total amount of credit available to you.  The higher your utilization rate is, the more risky creditors perceive you. A high utilization rate often indicates a higher chance of not paying debts. Creditors like to see some credit being used; however, typically not more than 20 percent.

7. Don’t open a bunch of credit cards at one time.

A portion of your credit score (10 percent) is determined by new credit inquiries, better known as hard inquiries. Each hard inquiry lowers your score by a few points and it can take several months to recover these points.  Each hard credit inquiry stays on your credit report for one or two years. If the inquiry is of the same type (ex: a mortgage loan), these inquiries are treated as the same and won’t negatively affect your score. However, multiple credit card inquiries are usually an indicator of adverse financial risk to credit lenders.



If you  don’t take away anything else from this post, take away this — credit is not a free loan. You will pay for credit in the form of interest. If you don’t pay it back, you risk the possibility of future employment opportunities, your ability to get good insurance, or obtain affordable rates on auto and home loans. Your decision to max out your Macy’s card today can cost you more money than you planned to spend.

For me, it cost me years of a less than desirable credit score, a disrespectful interest rate on my car note, years lost of investing, and the freedom to take employment that would have better suited my personality. It affects many parts of your life, not just your money. Debt takes away your freedom to choose! I’ve been through the bankruptcy and I’ve recovered financially, but if I knew then what I know now, I could have avoided all the headache that accompanies making poor credit decisions. Make the choice today to responsibly build your credit, and if you’ve already made some mistakes — it’s never too late to rebuild your credit.


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Latoya Scott
Latoya is a writer for hire who loves talking about budgets and money. Her mission includes paying off $79,000 in student loans and aspiring other millennials to hustle their way towards financial freedom. Her work has been featured on The Huffington Post, Rockstar Finance, and My Fab Finance.

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  • Reply Chonce February 15, 2016 at 7:42 pm

    #3 is a great tip for people who have credit card debt. I’ve been on a journey to build my credit for the past few years and can’t wait until 15+ inquiries fall off my report this spring. I would say if you have to finance something like a car, go to a credit union first because dealerships will run your credit dozens of times while shopping around for your rate and they won’t even care.

    • Reply Latoya S February 16, 2016 at 11:04 pm

      Hey Chonce,

      This is true! If my husband and I could do our car search over, we would have definitely sought out our own financing with our bank because even though our interest rate is really low on our car, I believe it could have been a smidge lower and they only would have had to run my husband’s credit once. And I know what you mean about those credit items falling off!

  • Reply DC @ Young Adult Money February 16, 2016 at 12:49 am

    This tip – “Build credit by maintaining a proper credit utilization ratio” is such an important one because I feel like a lot of people who have their first credit card don’t know this rule. The issue is when you get your first card you only have, say, $500 spending limit. It’s easy for an adult to put on close to $500 a month on their card and only pay it off once a month. In reality it’s best to make multiple payments a month to keep it as far below the 30% as possible.

    • Reply Latoya S February 16, 2016 at 11:05 pm

      That is a great and often overlooked tip! Thanks for sharing:)

  • Reply Shirria February 16, 2016 at 3:30 pm

    I never understood “credit card utilization” until recently. Unfortunately, the unknown has affected my credit score. To get out of debt I make substantial payments twice per month to get the balances low.

  • Reply Latoya S February 16, 2016 at 11:08 pm

    Shirria, neither did I and it’s actually kinda funny how I learned about it. I was actually shocked when I saw my credit score and saw that it was so high considering my bankruptcy hasn’t dropped off of my credit report ( I have about 2 more years). It’s because my credit utilization was kicking butt. I have a lot of credit available to use and I’m using less than 10 percent of it. It’s gotten my score into the high 700’s despite my bankruptcy and I know that making those payments on time and beyond the minimum are contributing to it as well. We all learn at our own pace, the important thing is that we do learn!

  • Reply Emily @ JohnJaneDoe February 17, 2016 at 10:27 am

    I know my own credit card problems got out of control with car repairs…I didn’t have the money to pay off some pretty big repairs (no emergency fund) and my debts spiraled from there because I didn’t adjust the rest of my spending to pay them off. So the interest spiraled, eventually out of control. The small charges added up, but the big ones were the knockout. I would have been better off to wait a while to get a credit card, but in the 80s it was easy for college kids to get them.

    • Reply Latoya S February 17, 2016 at 2:28 pm

      Hi Emily, It was still easy in the early ’00 as well. I’m glad that it’s more difficult these days for kids to get credit cards.

  • Reply Nate Matherson March 9, 2016 at 10:11 pm

    Great article! Helpful tips.. especially for Millennials. Millennials have a adverse reaction to credit cards. According to Bankrate, “whopping 63 percent of millennials (ages 18 to 29) don’t have a credit card”. That being said, credit cards can be a great tool for building credit.

    • Reply Latoya Scott March 10, 2016 at 12:32 pm

      Hi Nate, they sure can. Younger millennials are experiencing the effects of the Great Recession from a different perspective than those of us over the 30-year-old age bracket. It is true that many younger millennials don’t have credit cards. They have been hit hard by student loans and the inability to get good employment.

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