Select Page

How To Build Credit History Properly Once And For All

- Dec 21, 2021 Building Credit, credit0 comments

There are many people that often complain to me that although they started building credit a long time ago they still don’t have a perfect credit score. 

Usually, the reason ends up being because they never set themselves up to build credit properly. In this post, I will teach you how to set yourself up to build credit properly, because once you’re doing it you may as well do it right.

Keep your oldest credit cards open

There are lots of great credit cards out there which offer many good perks, either for travel or for shopping, but they charge you a fee every year to keep the card open. 

Although it might be worthwhile for you to pay the fee now, it may not be worthwhile for you to keep the card open in the future. When starting out, I always recommend that the first three credit cards you apply for should be credit cards that don’t have an annual fee. Like this, you will be able to keep those cards open for as long as you live, without ever having to worry about the annual fee. 

One of the big mistakes people make is that they keep their cards open for, let’s say, two years. Then they close them and apply for new ones. This practice will never let you build proper credit since the old accounts, even if they will still be on your credit report (for up to 10 years), won’t have any recent activity and the cards will be marked as closed. Therefore, Fico will (almost) not count it in their scoring model, leaving you with a much lower score than what you deserve.

So remember, in order to build proper credit history make sure to never close your oldest three credit cards.

Keep your oldest credit cards active

Fico will only, or almost only, include in their scoring model cards which are active. Therefore, even if you have a credit card that is 10 years old, if the card is lying around in your drawer and not being actively used, the card will be cut out of the Fico scoring model, which will ultimately cause your score to drop.

I see this all the time. People reach out for advice on how to improve their credit, and when reviewing their report I find that they have not used their credit cards for the past 6 months! (Sometimes they explain that their mortgage broker told them to stop using their credit cards. !?!) All the advice I give them is to just start using their credit cards again….. and Bingo! Their score shoots back up!

Having a few credit cards

It is important when you start building credit, not to have only one credit card. It is actually recommended to have two or three credit cards. This is because in order to build credit properly, scoring models will want to see that you’re able to juggle multiple credit lines. Preferably, if possible, open different types of trade lines. This will help you with your credit mix. For example, leasing a car or getting a mortgage will help you build credit even faster. At least make sure you have a few credit cards, and as mentioned above, choose cards that don’t have an annual fee (you can find some here).

Pro Tip

For your first three credit cards, choose cards from different banks so just in case one bank shuts you down, you don’t lose all your oldest credit cards at the same time. As the saying goes, “don’t put all your eggs in one basket”. 

The 5 Most Important Factors In A FICO Score

Every self-proclaimed guru on Google has “5 reasons why blah blah blah”.  But now I’m about to give you 5 REAL factors that FICO looks at when calculating your credit...

Read Post

Good luck on building credit and remember to check out the Ultimate credit cards finder to find the best credit cards for you out there!

Was this article helpful?

Sam Sam has nearly a decade's worth of experience educating his many readers on everything credit. Sam spends his days checking out credit cards for a full report, from the minute benefit details to the shebang of welcome bonuses. Plus studying the ins and outs of building proper credit. It’s his favorite pastime and he loves sharing it with others.

Leave A Comments

This site uses Akismet to reduce spam. Learn how your comment data is processed.

0 Comments

Recent Posts

Follow us

Click here to subscribe to
our WhatsApp channel

Todays
best offers

Chase Ink Business Preferred

Earn 100,000 points after spending $15,000 within the first 3 months.

more info

Amex Platinum

Earn 150,000 points after spending $6,000 within the first 6 months. Plus earn 10 points at restaurants on up to $25,000 spent within the first 6 months. Expires 06/08/2022 (terms apply)

more info

Chase Sapphire Preferred

Earn 80,000 points after spending $4,000 within the first 3 months.

more info

JetBlue Business

Earn 80,000 points plus a $99 statement credit after spending $2,000 within the first 90 days.

more info

You May Also Like

Understanding The Fico Scorecards

Understanding The Fico Scorecards

People ask, how much will a late payment affect my credit score? 100 points? 150 points? What effect will high utilization have on my credit score? The answer to all of these questions is that it depends. The Fico scoring model is built to be able to match your credit...

read more
Does Carrying A Balance Help Build Credit? (Myth)

Does Carrying A Balance Help Build Credit? (Myth)

Many people believe that carrying a balance will help them build credit or up their chances of getting approved for a credit card. People think that if they pay interest then the bank is making money off them (that part is true!).  So if the banks are making money,...

read more
Which Credit Score Model Is Used For Mortgage Loans?

Which Credit Score Model Is Used For Mortgage Loans?

As discussed in past posts, there are many different scoring models, resulting in different credit scores. When applying for a mortgage, people often like to know up front what their credit score is, in order to have an idea of what loan type and what loan amount they...

read more
6 Mistakes Beginners Make When Building Credit

6 Mistakes Beginners Make When Building Credit

Every year there are millions of consumers who start building credit for the first time. I often see many consumers making the same mistakes. If I would have a microphone to shout out to all people building credit, here is what I would tell them.

read more
New Guide On How To Build Credit From A-Z

New Guide On How To Build Credit From A-Z

Credit is something that is confusing to many people. Especially for those just starting out to build credit. That’s why we’re excited to announce the release of our new guide on building credit!

read more
Everything You Need to Know About a  Fico Score

Everything You Need to Know About a Fico Score

If you recently applied for a credit card, mortgage, etc.,  you probably bumped into a 3 digit number called your FICO score. What in the world does that three-digit number mean? In this post, we will discuss everything you need to know about Fico scores. Let’s jump...

read more

Download link sent
succesfully

Got it *please check your promotional inbox

Error sending download link

Try Again