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How to Build Your Credit Responsibly

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If you have a new credit card, one reason you might have gotten it is so that you can use it to finance purchases you might otherwise have had a hard time making. You may also have secured the card to help you rebuild your credit standing.

If that’s the case, there are a few things you should know about how to manage that account to boost your score as quickly as possible. Perhaps the most important thing is to only use your card for payments that you don’t make every day. Putting lunch or a cup of coffee on your credit card might get you into bad spending habits and cause you to put more debt onto the card than you can reasonably afford. In fact, you might want to consider only spending as much on the card as you can pay back every month to keep yourself headed in the right direction.

Along those same lines, if you do end up racking up more debt than you can pay back in a single month, it’s important that you at least pay back more than the minimum. Again, this is to ensure that you don’t get into bad habits, because only paying the minimum every month will keep you in debt much longer than you’d probably like.

As a general rule of thumb, you should try to keep your debt to 10 percent or less of your card’s total credit limit. That’s because 30 percent of your credit rating is based on just the amount of credit you use at any given time, and the less you utilize, the better. There is a myth that lenders want you to have at least some debt outstanding all the time, but it’s not true; the closer your balance is to zero, the better off you’ll be both financially and in terms of a maintaining a strong credit rating.

Of course, when you’re opening a new credit card account, you should take a look at all the ways in which it might affect your finances. Consider things like whether you’re able to make all the payments you need to—on time and in full—as well as if it might affect your ability to pay other bills.

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