Building Credit the Right Way

There are many differing opinions about credit across the PF blogosphere. Some, like Dave Ramsey, are of the opinion that once your credit card and other debts are gone you should avoid debt like the plague and never, ever use credit cards again.

But others, like me, think that deciding to avoid credit usage altogether for the rest of your life is not the best decision. There are plenty of credit cards out there with excellent reward programs for travel points and cash back. It’s silly not to take advantage of credit card reward offers if you can use that credit responsibly. One great way to use credit card rewards to your advantage is to always put cash back in your savings account.

In order to qualify for the credit cards with the best rewards, you must first be sure you have a good credit score.

Don’t have a good credit score? No problem, here’s how you can help build your score!

In order to build credit, you must have credit. Keep at least one credit card open at a time. I know lots of people suggest closing your cards after you pay them off. While I’m in favor of this for the most part, you should keep your oldest card open as long as possible. To do this, you must use the card at least occasionally. It will have the greatest length of history, which is one of the factors that goes into generating your credit score.

Your credit utilization ratio is also used to determine your score. No idea what that means? It’s just a fancy way of determining how much of your credit limit are you using month to month. If you pay your cards off regularly and keep balances nil to none, this factor will be in your favor. One thing I do is ignore when my limit is increased. Do not fall into the trap of thinking that because your credit limit is increased you can spend more, this will just get you into trouble.

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This one may seem obvious, but you should always make your payments on time. In fact, if you are using credit for rewards correctly, you should be able to pay off your credit card as soon as you arrive home from making a purchase. This is because you should never put purchases on credit that you can’t actually afford. There are some bloggers who like to make payments online before the end of the billing period so they never actually owe anything when the bill comes. This can also help your utilization ratio since credit card companies report this information at billing time.

Be careful not to open too many new accounts at once. This one usually gets new/young borrowers or those just getting a “real job” right out of college into trouble. With higher income comes a higher cost of living (that’s a whole other topic) and usually new credit cards and lines of credit. But beware, lots of creditors accessing your score at once and a bunch of new credit cards is a red flag and can lower your score significantly.

I may not seem like the best resource when it comes to harping about using credit responsibly, after all I am in credit card debt. But, it is my experience with owing and trying desperately to get out of debt that makes me so much wiser today. I know that in the future when my debts are gone, I will still be using credit, though much more responsibly (and to earn rewards of course)!

Now that you know how to improve your credit score the right way, and a little bit about using credit card rewards responsibly, are credit card rewards something you’d like to pursue?

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About Kayla

Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at ShoeaholicNoMore or follow her on Twitter.


  1. Here’s another option for those that are just beginning to build or rebuild their credit and are having a hard time getting approved for a cc. They can go into their local branch and speak with a bank rep to open a secured credit card. They would hand over an amount that will serve as their credit limit (ex. $500) for a period of time, usually a year or two. Once they have no late payments during the hold period, the bank will return the deposit and convert the secured card into a regular one.

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