If you use them wisely, credit cards can be your friend.
Being debt-free is great, but if you’ve avoided building a credit history, it might hurt you in the long run.
- Make all loan and credit card payments on time and in full.
- Don’t close out old accounts — doing so can affect the average age of your credit history, and the longer you have established lines of credit, the better for your overall score.
- Keep a low debt-to-credit utilization ratio.
- Don’t open many accounts at once or incur multiple inquiries on your credit over the span of a few weeks.
It takes some time to improve bad credit, but it’ll pay off in the end (no pun intended). Having a good credit score — and some positive credit history — can go a long way in helping you secure a loan at the best interest rate available.