Money Girl answers 8 frequently asked questions about credit cards and gives tips to maintain and build credit.
8 Credit Card FAQs and Tips to Build Credit
Here are 8 frequently asked questions about using credit cards and how to build credit no matter your situation:
Answer: In order to have a credit score you must have a credit history of at least 3 to 6 months. While it might seem like a catch-22 to need credit before you can be approved for credit, there’s an easy solution.
No matter if you’re just starting to build credit from scratch or are rebuilding it, you can always get a secured credit card. They look just like regular, unsecured credit cards, are accepted in all the same places, and give you many of the same benefits.
The main difference between a secured and a regular credit card is that you must make an upfront, refundable deposit to open the account. You choose the amount, which could range from $200 to $3,000, and it becomes your available credit limit.
When choosing a secured credit card, make sure that it reports your payment information to the national credit agencies because that’s the only way to build credit. Check out these great card options:
- Open Sky Secured Visa
- First Progress Secured MasterCard
- CreditCards.com Secured Cards
- USAA Secured Card
Credit Card Question #2: Bill asks, “I’m trying to improve my credit so I can buy a house in a few years. I recently got 2 credit cards, even though I don’t really need them. Both say they will increase my credit limit in 6 months as long as I make minimum payments. Is it better for my credit to pay the minimum or the full balance every month?”
Answer: Making timely payments on credit accounts is one of the most important factors for your credit scores. As long as your minimum payment is received by the statement due date, you can build great credit.
However, it’s never a good idea to carry a balance on a credit card from month to month. The interest can cause you to end up paying 2 to 3 times more for items charged on a card. Additionally, you want to keep your credit utilization below a certain threshold, which I’ll cover in a moment.
So I recommend that you only make card charges that you can pay off in full every month. Sending in the full balance allows you to build great credit without paying interest.
See also: The Credit Score Survival Kit—a free ebook and video tutorial with strategies to build credit fast!