How to Build Good Credit in the United States

Ensuring you have a respectable credit score is an essential aspect of living a successful life in the United States. A person’s credit determines their ability to rent an apartment, buy a home, buy a car, obtain credit cards, and receive insurance at competitive rates.

Many individuals who arrive in the U.S. from other countries, or are starting their first job out of high school or college, may not be sure about the best way to improve their credit. Below is our comprehensive guide on how to build good credit in the United States.

Spend What You Can Afford

One of the most significant mistakes you can make when getting your first few credit cards is to borrow more money than you can afford. A lot of people assume they can pay off their credit card for many months and years without any repercussions.

It is not true, however, as there are two ways that you are negatively impacted by having excessive credit card debt. The first impact is the interest you have to pay on your balance, which can drain your bank balance even further. The second impact is on your credit score, as people who are utilizing a significant portion of their credit lines receive lower credit scores.

Use Credit Cards for Regular Spending

Rather than spending money through your debit card at the grocery store, gas station, supermarket, or movie theater, use your credit card. Such everyday spending is easy to pay off if you are working, and it helps you build up your credit score.

Do not worry if you are a newcomer to the U.S., as you can use resources such as Nova Credit to transfer your credit history from another country. It helps you obtain a rewards credit card with competitive terms.

Start With One or Two Cards

There is nothing wrong with having five or six credit cards, but someone who is new to the process should probably only have one or two. If you are undecided on what card you should obtain, you may want to check out a list of the best American Express cards for newcomers and people with slightly lower credit.

When you are sticking to one or two credit cards, it is helpful to get ones that are more general in their rewards. Travel and hotel credit cards are appealing, but they are best when you already have a few cards for your everyday purchases.

Standard rewards or cash back credit cards are excellent value for newcomers, as they do not have any annual fee. They also provide significant perks, especially when you use them for your regular spending.

Make Timely Payments (In Full)

The best way to ensure that you are steadily increasing your credit score is by paying all your credit card bills on time. Any late payments negatively impact your credit, and the same applies to paying rent, utility bills, and other monthly expenses. There should be no delinquencies or late payments on your record if you wish to maintain excellent credit.

It also helps to pay your balance in full. As we mentioned above, individuals who are utilizing a significant portion of their available credit lose points on their credit score. By paying your balances in full each month, you are avoiding interest payments and keeping your utilization percentage very low.

Maintain Older Credit Card Accounts

It is always a good idea to have one or two older credit card accounts active, even if you are not using them as much as you did before. As you build your credit, you get more offers for rewards credit cards with exciting perks. You may want to use those cards more frequently, but keeping the older accounts open does help your credit score.

Take It Slow

There is a tendency among some individuals to try and do too much too quickly. They attempt to obtain four or five credit cards in the hopes of boosting their credit quickly. It is a valiant effort, but it is not that helpful.

It takes time to build up your credit score, while any mistakes can have lasting consequences. Taking the process one step at a time is the best way to ensure that you do not have any slip ups. It is better if it takes you a few years to reach a 750-800 credit score, rather than taking on too much and hurting your score with late payments or delinquencies.