I've never paid much — OK, any — attention to my credit score until I left graduate school. My parents had a mostly cash-only approach and were quite frugal. (They did teach me most of my good money habits, after all.)
Once I entered adulthood, a three-digit number seemed to dictate the outcome of the biggest moments of my life, like getting a new apartment in San Francisco or even landing a job. I had good enough financial habits and zero debt, but I'd made some small credit card fumbles along the way. My credit score reflected my laissez-faire approach to credit.
Now, both of my scores on Credit Karma are over 800. What's great is I've been able to build that excellent credit score with only credit cards. Now, I know a lot of people like to avoid credit cards because of the temptation to spend, but if you're smart about how you use them, you can build a really impressive credit score without racking up loads of other debt. Here is a five-step guide on how I hit 800 using only credit cards:
1. Pick a card you can qualify for.
I've had a credit card since I was in college. It was a card I got from my bank, and I was pretty good at paying it off monthly. Once I was ready to pull the trigger on a new card, I wanted something that would give me cash back for my spending. (Yeah, I was getting credit smart.)
I eyed a travel rewards card, but the card requires excellent credit for approval, and I wasn't there yet. Instead, I started with a basic cash back card. I was pretty stoked when I was approved.
2. Know your due date.
I knew that in order to build credit with my new card, I had to stay on top of my monthly payments. Your payment history can often be the most meaningful factor of your credit score. Missing just one or two payments can hurt your score significantly. I made sure I knew my due date and gave myself a reminder. For me, that was a calendar alert five days before my payment was due. (Hey, you can never be too careful.)
I also signed up for automatic payments just in case my calendar reminder didn't work. Some people even choose to call their credit card issuer to change the due date so it's easier to remember, or to make all of their due dates the same.
3. Keep your monthly credit card spending to less than 30 percent of your limits.
Your credit utilization rate is another influential factor of your score. It's essentially a snapshot of your spending habits. It's the balances on all of your credit cards divided by all of your credit limits. It's important to know you do not need to carry over a balance from month to month to show your utilization.
For me, maintaining a healthy credit utilization rate has been one of the best ways to keep a good credit score. In general, you'll want to keep your credit utilization rate below 30 percent, although having a lower utilization rate is even better.
Each additional credit card you have can help keep your credit utilization rate low; just remember to keep your spending in check. Bottom line? Swipe the plastic only if you're sure you can afford to pay it all back at the end of each month. It'll save you from any surprises, too.
4. Don't sweat about your age of credit history.
While the age of your credit history is a part of your credit score, it's not a big deal if you don't have a long history yet. There isn't a set amount of time required to have a good score. Instead, focus on what your credit history represents. It's your track record that shows whether you've been paying your bills regularly and managing your credit responsibly.
As a Millennial, many of my credit cards haven't been open for too long, but it hasn't stopped me from staying on top of my accounts and having a great credit score. Remember, there isn't much you can do besides keeping your oldest account active and being patient.
5. Wait six months to a year before applying for another card.
Excellent credit takes time, and it's generally not a good idea to apply for new credit just to have different types of accounts on your credit report. So, think before you apply. When a bank or lender looks at your credit report, it typically results in a hard inquiry. Hard inquiries often result in a small drop to your credit score, so before you authorize a company to check your credit report as part of the application process, make sure it's worth it.
For me, that meant waiting a year before applying for another credit card. By then, I had built a solid foundation and was ready to upgrade to a travel rewards credit card. Then, I waited another seven months to apply and got approved. Finally, another year later, I was approved for a premium rewards card. I stopped there, but I have been eyeing some airline rewards cards lately.
Getting an excellent credit score doesn't have to be overwhelming or intimidating. The good news is by doing only a few things right over time, you can make solid improvements to your credit.
Your credit history starts now, so try not to make mistakes that will take a long time to fix. Working hard to establish your credit carefully will put you in a great place fairly quickly. Don't say no to credit. Instead, understand how to build and manage it well. You just might make it to the #800Club.