Between credit limits, student loans, and unsecured credit cards, it’s difficult to decide how to build your credit with as minor damage as possible to your finances.

Continue to be a responsible credit builder by avoiding these five mistakes:

#1 Not Paying Bills on Time

When building your credit, you must pay your bills on time. Making late payments can result in unwanted fees and take a hit to your credit score.

It all seems pretty ridiculous, right? You were unable to pay your bill, and so you’re charged an additional fee...not cool.

It’s essential to set up a budget and stick to it so that you can always afford your purchases. Using a debit card rather than credit is a simple fix to avoiding bills. Believe it or not, there are debit cards out there that can help you build your credit.

If you already have a credit card open, make sure that your budget aligns with your swiping and that you have reminders set for when your bills are due.

#2 Running Into Hidden Fees

Most major credit card companies come with hidden fees. Additional fees may be in the million-page fine print of your contract, but that’s not very visible to us. 

When signing up for a credit card, always ask as many questions as you need to like:

• Is there an overdraft fee? 
• What’s the charge for making a late payment? 
• Are there any annual fees? 

You should always know what you’re getting into when you open an account anywhere.

#3 Taking On Unnecessary Credit

To build your credit, you typically would need to open a line of credit. Having an open line of credit and managing it well tells credit bureaus that you’re a responsible spender.

Sometimes, major credit card issuers will tempt you to spend more than you can afford by offering a credit line far beyond what you need. Unnecessary credit can leave you in a cycle of debt that’s incredibly hard to come back from.

Using a vehicle without temptation is how you build credit without a credit card. If you have a budget based on your income that accounts for your expenses, you don’t need any credit.

Rising Tides can be your vehicle without temptation. Rising Tides helps you build credit even with past mistakes.

Despite the gossip, you can start building your credit without taking on a credit line or loan that you don’t need.

#4 Opening a Credit Line With a Family Member

Sometimes we open joint credit cards because they can be convenient. If you have a partner, spouse, or family member whose finances often mingle with yours, then you may have considered making them an authorized user of your card.

Although a joint card is convenient, it makes responsible spending twice as tricky. Your credit card may be joint, but everybody’s credit scores are independent. 

When one of you is being financially responsible, it will improve both of your credit scores. On the flip side of things, poor financial management by one of you can lead to a bad credit score for both of you.

Try to support your loved ones by giving them a helping hand when in need, but be careful when you entrust others with the responsibility of your credit score.

#5 Using Only Credit Cards

Part of your credit score relies on your credit portfolio. Credit bureaus don’t only want to see revolving credit (the kind that comes with a credit card); they want to see diversity. Diversity lets credit bureaus know that you can manage many different types of credit under different terms.

When building your credit, try to find other ways to establish your creditworthiness in a responsible manner. Make a large purchase with a retailer that offers financing options, report your rent payments to bureaus, or open a debit card like Extra that helps you build credit.¹

Having a diverse portfolio of credit lines is a great way to build a good credit score.

Happy Credit Building

We’re proud of you for looking into responsible credit building. Having an excellent credit score can help you in a multitude of ways. If you’re doing some financial planning for your 20s or retirement, we want you to avoid silly mistakes. Let’s recap:

• Not Paying Bills on Time: Having a solid payment history will always boost your credit score.
• Running Into Hidden Fees: Ask as many questions as you need to when opening an account and always go for super transparent options.
• Taking On Unnecessary Credit: Only take out credit that you need. If you’re wondering how to build credit when you have none, consider a credit-building tool like kikoff
• Opening A Credit Line With Someone Else: A responsible authorized user improves your credit score, but an irresponsible user has the opposite effect.
• Using Only Credit Cards: Credit bureaus like when you have a diverse credit portfolio. Showing that you can handle different kinds of credit will boost your score.

We hope that you don’t run into irreversible credit mishaps and wish you a happy credit-building experience. If you do hit a brick wall, press the sign up button so we can get you out of it. :)