How to start building good credit?

I recently got approved for my first credit card with a $300 Dollar limit since I have no credit history and I was wondering what was the best way to build a good credit history?

I've heard several things about credit utilization some people say that I should try to stay below 20% utilization while others say that I shouldn't go over 10%...with a 300 dollar limit, it's difficult to stay below 10% utilization...

So you guys with good credit what's your advice? stay below 20% utilization? below 10%?

Also I will pay off my balance before the due date so I don't carry over any balances over to the next month as well.

a reply to: muse7

You know what is weird...I never used a credit card for years until I was in my 30s and then I retired shortly after...when I went to get my credit score it was 800 If i remember right. I had never made payments on anything. So I have no idea how mine was that high. Oddly when I started using it I had a system that immediately paid it off from my bank account the next day. My credit score then dropped to like 750ish. Makes no sense to me. Now I don't use one any more.

But definitely dont miss a payment. You should look into one of those cards that give you points back too...like on gas or whatever. The amazon card was good with that.

a reply to: muse7

It's pretty simple actually. Pay what you owe and don't be late.


Edit; I looked at one of your questions again. Don't pay off your balance if you want to build credit. Creditors don't like people that don't pay interest.

People are giving you the right idea. Keep utilization well below the max. Yup, for $300 that's difficult, but 20% is a good number. If the goal is "good credit," getting a loan and paying it off is an excellent way to advance it. Your credit report has a line for every credit activity you have that you want to see say, "Pays as per agreement." Over time as you do this more and more your history grows.

Now there are people who will tell you, "Corporate greed. I never use credit cards, blah, blah, blah." and I understand the sentiment. But unless you want to live off the grid a little bit of credit allows you to live more easily. You ever want to rent a car? Unless you have a credit card, you won't be able to. Wise and prudent are the keys here.

Edit to add: That $300 limit won't be there for long. They'll increase it pretty fast if you buy a couple of things and pay on time.

I have seen both the bad\good credit score sides of life.

When I was stupid and in my 20s I accumulated roughly $26k in credit card debt. Im a firm believer in accountability so rather then asking for a redo on my mistakes and declaring bankruptcy I enrolled in a debt management program. Through that program I paid roughly $600 a month until I had paid off my debts. Going in to that program I had a sub 600 credit score and coming through it 8 years later I had an above 700 which is now over 800 credit score.

The most important thing you can drill in your head is that building good credit doesn't happen over night..
The next most important thing, like schuyler said, is that having good credit impacts you in multiple ways..
Many companies do credit checks on possible jobs, various types of loans and multiple other things.

When you are first starting out the most important thing you can do is use your credit card and pay it off. It doesnt have to be major purchases, it can be simple things like groceries or whatever. Just use it, pay it off, rinse and repeat. As you keep building your score add additional cards though never cluster more than 1 hard inquiry in a 3 month period. Each app for a new card will give a small temporary hit to your score. Rinse and repeat that approach. As your score goes up figure out rewards type cards as it's always good to earn if you are using it for required things.

Be patient, pay it off on time and figure out how to play the credit game.

a reply to: muse7

Buy something small and inexpensive (like under a couple hundred)...make the payments on time...and pay it off a week or month or so early. Start small.

Electronics, furniture....stuff like that from national chains is a good way to start building.

a reply to: muse7

I always seem to have 750+ just by paying off loans ahead of time.

My rules,

Get a 3 year loan on a major purchase, make sure there is no penalty for early pay-off. Pay it off in 13-18 months.

Do that a few times, have no late payments and your good.

Always pay more then the payment. If you have a car payment for say $340, just pay $400 a month.

Just always round up to the next hundred increment or more if you can.

If you want a good credit score the simple way to do it is to not acquire debt. If you pay your rent and utilities on time, you will have good credit without ever acquiring debt. The "credit score" is a scheme cooked up by banksters to lure you into the world of debt slavery.
Just pay your bills on time and don't go jumping into debt for the sake of "building" credit. Every study ever done shows that a person will spend up to 30% more when using a credit card rather than cash.
Going into debt is like jumping into a pit of vipers and expecting to survive without major bodily damage. You might well survive the ordeal but it will be painful. I speak from sad experience.

a reply to: muse7

Don't spend money you don't own. Use your credit card often, but only if you can pay it off immediately, and your credit will go up.

You buy good credit by having debt that is properly managed.

If you pay your card off, your score will go up, but more slowly than having a little something on it and paying on time. Think of the interest payment as buying good credit.

To boost my score I got a card and used it just for gas. At the end of the month I paid all but 25%. 25% of the limit shows u arnt in financial straights and "need" the credit; that you're smart enough to manage any debt u have.

Remember, good credit is a must if you want to make any large purchases in the future, like a house or car or something. Good credit is bought, like anything else.

To summarize. Leave 25% on your card and pay on time. No more than 3 cards EVER (keeps u from accidentally going overboard or forgetting a bill). Every 6 months call the card company and ask for a better rate or limit, or benefits like cash back for gas ( I get that and it adds up). Join credit karma and keep an eye on your score and reports.

Hope this helps.

Keep your balance low. Try to pay as much as you can each billing cycle. it's ok to max it out once in awhile, as long as prove you can catch up. They want to see you're responsible. Treating it like its a free shopping spree can be a mistake many make. Better to use it for one large item, paying it off. Then you can get another item.

You didn't say the type of credit card it was. Best to just have one, like a visa.
After awhile you will be able to get a higher limit. It's takes about a year to see your credit score change,

My credit score is excellent. They said its because I never max out my limit and keep it paid. I missed some payments when I was in hospital. It didn't affect my credit score. I don't spend with it unless I know for certain I will have the funds to pay it . Once in awhile , maybe Xmas time I let it go up a bit, but always catch up. They do like to see that you can recover when this happens. So it's ok to use it up sometimes, just prove you always recover from it. Eventually this shows them your spending habits and how you can manage.

The most significant thing to raise your credit is buying something expensive like a house or car and making all your payments on time. Next is spending lots of money on your credit card and paying off high balances without missing any payments.

a reply to: muse7

wanna become a debt slave? get a loan.

You've got off on the wrong foot to start with. Change you mentality to a savings mentality not a debt mentality. Do you realise that will pay approximately 150% of the price of everything you buy when you buy on credit.

just because debt (credit) is common its is not the right way to go, accept where its a payment system back up by the funds in the account.

Wrong decision I'm afraid.

originally posted by: Azureblue
a reply to: muse7

wanna become a debt slave? get a loan.

Not really. Fact is few people can buy a house for cash. It's just not possible for the average person. You need to treat credit as a resource to be well-treated, not a crutch to get things you cannot afford. For example, I have a single loan at 0% interest with funds to pay it off if necessary. My credit score is in the 830 range. My two credit cards, while used, are paid off in full every month. This means I have $50,000 immediately available to me if I need it.

Life is not as simple as you portray it. Credit cards are necessary in a lot of places just to do business. If you rent a car or a hotel room, you'll be asked for a credit card even if you don't use it. If you purchase anything online, you need a credit card, one that is secured against unlawful purchases in case your is stolen. I have no problem if you want to live your life without them, but the fact is your solution is not for everyone. OP wasn't asking how to avoid using credit; he was asking how to properly secure credit. Most of these answers have been right on the money, so to speak. Yours avoided the question altogether.

If someone asks how to become a good parent, an answer of "Don't become one." is not responsive. Same issue here.