Personal Finance

Build a Good
Credit Score

Smart habits for your first credit card

A credit card can help you begin building credit,but only if you use it carefully. Paying on time, keeping your balance low, and avoiding unnecessary applications can strengthen the credit history lenders may review later.

Goal for today: understand how credit scores work and learn 3 habits that can help you build credit responsibly.

Know before you swipe

How It Works

What drives a score?

FICO stands for Fair Isaac Corporation, which created a widely used credit-scoring system. When you begin using a credit card, your payment and balance habits can become part of your credit history. FICO summarizes that information using five categories:

65%payment history
+ amounts owed

35%Payment history: whether you pay on time

30%Amounts owed: balances and credit use

15%Length of history: how long accounts have been open

10%New credit: recent applications and accounts

10%Credit mix: experience with different account types

A path leading toward a stronger credit score

Habit 1

Pay on time.
Every time.

Payment history is the single biggest FICO category. Late payments can seriously damage the credit history you are beginning to build.

✓

Set autopay

At least the minimum payment.

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Add reminders

Calendar alerts before due dates.

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Act early

If you are struggling, contact the lender before you miss.

Tiny habit, huge impact

Habit 2

Keep your balance low

Credit utilization compares your card balance with your credit limit. Using less of your available credit generally helps your score.

A helpful guideline:

1

Try to stay below 30%.

If your credit limit is $500, 30% is $150. Keep your card below that amount, the lower is even better.

2

Use the card for small purchases

Charge only what you already know you can afford.

3

Pay the full statement balance

You do not need to carry a balance or pay interest to build credit.

Credit card and a credit utilization gauge

Habit 3

Protect your credit and build good habits

A good score is built over time. Keep your information accurate, protect your account, and repeat the same smart habits.

Check your credit reports for mistakes.

Protect your account information and watch for unfamiliar activity.

Start with one card, use it for small purchases, and pay the balance on time each month.

Repeat the basics: pay on time, keep balances low, and apply for new credit only when needed.

Before your first swipe: set autopay + a balance alert

Credit report under review with a security shield

Build a GoodCredit Score

Build a Good
Credit Score