Wondering how to establish credit responsibly? Build a stellar credit history with the guidance below.

Anyone who leads a healthy lifestyle will tell you this simple truth: it’s much easier to stay in shape than to get in shape. The same holds true for financial health: it’s so much easier to build a great credit score than to repair a bad one. Whether you’ve just graduated, are starting your first job or are researching first time credit cards to establish credit, these tips can help you start, and stay, on the path to a healthy financial future.

#1 Pay Your Bills On Time

The number one way to establish yourself as a responsible credit user is to consistently pay your bills on time. That sounds simple but it’s all too easy to get caught up in a hectic schedule and then find a past-due bill at the bottom of a stack of mail. There are a couple ways to avoid this common misstep.

First, structure your budget so you pay your credit card bills on or near the first of the month (or whenever you get paid). That way you can get the payment out of the way while your bank account is flush. Next set reminders on your phone or calendar when the monthly payment is due. Many credit cards allow you to set up email alerts as well. Finally, consider using an autopay option if you pay about the same amount each month. Having an automatic payment come out the day after you get paid eliminates any possibility of forgetting to actively make a payment.

If you’ve established a solid history of on-time payment with a credit card and miss a payment date be sure to contact a customer service representative. When you have a long-term relationship with a lender they are likely to forgive your first late payment and keep your credit record clean.

#2 Don’t Buy What You Can’t Afford

Again this is easier said than done. Even the most financially responsible people can be tempted to splurge on things they can’t afford when money is tight at the end of a pay period or for a special occasion. Here are some ways to structure your budget to avoid credit card debt:

  • Establish an emergency fund. Put some money in a separate account from your general savings to serveas a cushion for life’s unexpected expenses. Car repairs, medical bills and family emergencies can bustyour budget and force you to put hundreds of dollars on credit if you don’t have a backup plan.
  • Set savings goals for major purchases. Purchasing your new TV will feel even sweeter when you walk outof the store with it paid for free and clear.

#3 Be Selective in Choosing Credit Cards

Choose your credit cards like you would a business partner: with research, selectivity and a solid understanding of how they can help you succeed. The best cards on the market have low APRs, low (or no) fees and added benefits such as fraud protection and rewards programs that suit your lifestyle. Shop and compare before deciding on one or two cards that are right for you.

There are a number of reasons to not sign up for every credit offer that comes your way:

  • Having multiple cards makes it harder to keep track of what you owe. It’s easy to only look at statementsindividually and not understand the extent of your debt overall.
  • Keeping track of six different cards makes it more difficult to make each payment on time.
  • Every time you sign up for a line of credit it creates an inquiry on your credit report. Too many of these in a short period of time could make lenders think you are having trouble being approved for credit.
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#4 Not Using Credit Doesn’t Give You a Good Credit Score

Avoiding credit altogether may seem like the safest way to stay out of debt. However, the reality is lenders want to see a demonstrated history of timely payments and responsible use before agreeing to a major loan such as a mortgage. If you use a credit card to establish credit responsibly, you can build a credit solid score while staying debt-free.

Also, don’t close a card when you’ve paid it off or you’re not actively using it. Keep the line of credit open to establish a longer credit history. If you’re concerned about falling back into bad spending habits with a paid-off card, keep it stashed somewhere safe in your home instead of your wallet.

#5 Aim for 30% Credit Utilization

Your credit utilization rate is the total amount you owe on credit cards divided by your total credit limit. For example, if you have one card with a $1,000 limit and are carrying a balance of $300, your utilization rate is 30%. While it’s difficult to calculate exactly how credit utilization impacts individual credit scores, Credit Karma states there is a strong correlation between credit utilization rates and credit scores, especially for people just starting a credit history.1

If you do find yourself carrying a balance try to keep it under 30% of the credit card limit. This is also where a second card can come in handy. By adding another line of credit you extend your overall credit limit, lowering your utilization rate. But for all of the reasons listed in Tip #3, don’t overextend yourself with too many cards.

Building a great score is about keeping an eye on the big picture. Maxing out one credit card won’t destroy your credit for life, but the fewer mistakes you make when starting out the better your credit score and overall finances will be. Discover card believes that consumers should be armed with the information they need to help them make informed credit decisions.



Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.