- Have Multiple Lines of Credit Open
So, what does this mean? You would think that having multiple lines of credit could be disastrous, but as it turns out, having a "thin" file can actually hurt your score. A thin credit file typically refers to a credit history with fewer than 5 credit files. So, try your best to leave multiple lines of credit open.
Also, don't close out on a line of credit once they are up to date. Having a larger credit history that's open is better than having a thin file.
Here's a tip: You can even ask your landlord to report your rent to the credit bureau if you need to add another credit file. However, this may only be an option for larger property management companies compared to a homeowner renting out their home- which might not.
- Try to Keep Consumer Debt Below 20%
Typically, when building credit, you should follow the 20% rule, which is consumer debt/net income < 20%. This means you should try to keep your debt below 20%, relative to your monthly income.
When it comes to building credit, a safe measure to take in order to ensure you are not using too much of your available credit is to keep your consumer debt below 20% of your net income. This ensures that you won't use a large percentage of available credit, which can ultimately hurt your credit score.
For example, let's say you make $20,000 a month. If you have a $10,000 credit limit, using $4,000 which is 20% of monthly income, is a safe target to avoid using too much of your available credit and appearing overextended.
Always pay your credit debts on timeThis goes without saying. Whenever you spend on a credit card, pay it off as if you spent it on your debit card. Practicing this method will help build your credit score over time, and is a great habit to practice in general for when you spend on credit.