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6 Simple Steps to Improve Your Credit Score

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

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Going from a 550 credit score to above 700 may seem overwhelmingly difficult, but it’s doable.

First, let’s quickly review the components of your credit score. Your FICO score is the one most commonly used by lenders who are reviewing your application for a loan or credit. There are five components to a FICO score:

  • Payment history
  • Current credit use/accounts owed
  • Length of credit history
  • New credit
  • Types of accounts

Your payment history makes up the largest percentage of your score, at 35%. This includes your history of making on-time or late payments. A late payment can really put a dent in your overall score — this should be avoided at all costs.

Your current credit use includes the amount of debt you have overall, the amount you owe on each of your accounts, the number of your accounts with balances, your remaining balance on installment accounts and your utilization rate (the amount of debt you have compared to your overall credit limit). Credit use makes up 30% of your overall score.

Next comes length of credit history, which is 15% of your FICO score. The longer you have responsibly maintained credit accounts, the better you will look to lenders.

Finally, new credit and your credit mix both make up 10% of your FICO score. Applying for new credit or loans can have a short-term impact on your score, particularly if a “hard inquiry” is made. This is when your credit report is pulled by a lender ahead of their decision, as opposed to a “soft inquiry,” which occurs when you are pre-approved by a lender. Typically, however, you shouldn’t worry too much about applying for new credit, as any ding to your score is often small and short-lived, while the benefits may ultimately outweigh the downfalls. For example, having access to more credit can help you improve your utilization rate.

Lenders will also look at the different kinds of credit accounts you have, including revolving accounts, such as credit cards, and installment loans, which include student loans, auto loans and mortgages. It can help your score, or your chances with specific lenders, to have a healthy mix of credit accounts.

If your score now isn’t what you want it to be, or if you don’t yet have a credit score at all, we’re here to help. If you follow these six simple steps, you should ultimately find yourself with a score you are pleased with.

Step 1: Get a line of credit

In order to establish credit history, you need to have a form of credit. The simplest way for you to begin will be to open a credit card. If your score is low or non-existent, you might consider applying for a secured or store card.

  • Secured Card: You’ll use your own money as collateral by putting down a deposit of a few hundred dollars with the bank. Typically, that amount will then be your credit limit. Once you prove you’re responsible, you can get back your deposit and upgrade to a regular credit card.
Visa Classic Secured Card from Justice FCU

Visa Classic Secured Card from Justice FCU

Annual fee
Minimum Deposit
Regular Purchase APR
16.90% Variable
  • Store Card: People with a low credit score can often qualify for store cards because banks are more likely to approve users who apply through the retailer. The catch is that the interest rates are often very high, so you should do your best to pay off your balance every month. [Read more here]
Target REDcard™ Credit Card

Target REDcard™ Credit Card

Annual fee
Rewards Rate
5% at Target &
Regular Purchase APR
25.15% Variable

Step 2: Keep your utilization rate low

As noted above, utilization is the amount of your credit limit you spend each month. For example, if you have a $500 credit limit and spend $50 in a month, your utilization will be 10%.

Your goal should be to never exceed 30% of your credit limit. Ideally, you should be even lower than 30%, because the lower your utilization rate, the better your score will be.

We recommend you make one small purchase a month, then pay it off as soon as the balance is due, to keep your utilization low and help increase your credit score at a faster rate.

Step 3: Pay in full, and on time, each month

The easiest way to prove you’re responsible is to only charge what you can afford. Never use your credit card to buy an item you won’t be able to pay off on time and in full each month.

Being late on your payments has an extremely negative impact on your credit score, once the late payment has been reported to the credit bureaus (typically 30 days after the missed due date).

Contrary to what some people may tell you, there is also no advantage to only paying the minimum amount due on your card. That will only result in you paying interest on your purchases, and it does nothing to help your credit score. Don’t fall into the minimum payment trap — your wallet will not be pleased.

Step 4: Avoid credit card debt

This goes hand-in-hand with step three. By only purchasing what you can pay off in full, you’ll never accumulate credit card debt.

If you’re already in debt from the misuse of credit cards, make sure you continue to pay at least the minimum due on time each month. Paying on time is the number one indicator of a responsible borrower.

You could also consider applying for a personal loan, and using the money from the loan to pay off your credit card debt. Personal loan companies have interest rates that can start as low as 4.25%, and some will approve people with credit scores as low as 550. You can shop around for a personal loan without hurting your score, because the lenders will approve you using a soft pull (which doesn’t impact your score). A study by MagnifyMoney’s parent company Lending Club showed that people who paid off their credit card debt with a personal loan saw their score increase by 31% on average, right away. You can look for the best personal loans using this personal loan tool at LendingTree. [Disclosure: LendingTree is the parent company of MagnifyMoney.] With a single application, you can check your rate with dozens of lenders. And the best part: LendingTree uses a soft pull, which means your credit score will not be negatively impacted.

After you pay off your credit cards with the proceeds from the loan, do not build up your debt again. Instead, just make one purchase each month and pay it off in full.

Once you pay off your cards, resist the urge to close them. Closing your cards will not only lower your utilization rate but remove history, which damages your score in the “length of credit history” category. The longer your credit history, the more time you have had to prove yourself as a responsible credit card holder.

Step 5: As your score improves, so do your options for better credit cards

You’ll start to get credit card offers as you begin to build your credit history and improve your score. Credit card companies still love sending snail mail.

Beware of any offers, especially for cashback cards, while your score is below 650. These cards typically provide little value and can smack you with high interest rates if you fail to follow step three.

Not sure if an offer is a good deal? Try checking it out in our cashback reward cards page. Our Magnify Transparency Score will help let you know if it’s the real deal.

Once you get your credit score above 680, the good credit card offers will start rolling in. You can have your pick of the top-tier reward credit cards and start using your regular spending to get cash back or rack up points for travel.

Step 6: Protect your score

Once you’ve achieved a higher credit score, but sure to protect it by following these steps:

  • Always pay on time – late or missed payments will cost you dearly
  • Try to keep your credit used below 30% of your available credit
  • Be sure to check your credit reports for accuracy and signs of fraud – you’re entitled to one free report per year from each of the three credit bureaus. You can get your reports at

If you have any questions or just want a helping hand, please reach out to us at [email protected] or tweet us @Magnify_Money

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Myth Busters: Do You Need to Carry a Balance on a Credit Card to Raise Your Score?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

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There is one persistent credit card myth that befuddles consumers from all walks of life. Parents tell children. Friends tell each other. Managers lecture employees. “You should carry a balance on a credit card,” they announce in authoritative voices. “It’s good for your credit score.”

In reality, there is absolutely no need for you to carry a balance on a credit card, and it is not a good way to build a strong credit history. Carrying a balance can, in fact, hurt both your credit score and your wallet.

Let’s break this down, and end the confusion for once and for all.

You have two main options for paying your credit card bill

1. Pay The Minimum Due

When your statement comes in the mail, or via email, or appears in the online portal for your credit card, it will show the total balance due, as well as a minimum amount due. If you owe $1,500, for example, your minimum due may be just $45.

Sure, you can pay the $45 and your credit report will reflect that you paid on time, and this won’t hurt your score. However, this strategy will ding your wallet because you’ll start paying interest on the outstanding balance due (unless you are still in the promotion period for a 0% credit card).

2. Pay the Balance

This one is simple and should be your go-to move. When you have a balance due and it shows on the online portal, or when you get the statement in the mail, pay it off on time and in full by the due date. In this case, your lender, the credit bureaus and your wallet should all be happy.

Where the confusion probably started

This myth may have started because many personal finance experts advise consumers to be active users of credit in order to build a history and be desirable to lenders.

It is true that you should actively use your credit cards so you can demonstrate responsible credit use. However, this doesn’t mean you need to carry a balance. All you need to do is use your card on a regular basis, then pay it off.  Even making a small monthly charge (say, your phone bill) can do the trick; this is something that can be set up automatically.

Then, every month, you should pay that charge off in full. What you shouldn’t do is receive the statement and just pay the minimum due – thus carry a balance. Again, while it doesn’t hurt your credit score to only pay the minimum due, you only end up paying more in interest to the bank. Why pay your lender more than what you paid when you made the charge to begin with? There is simply no benefit to this.

To put it in simplest terms

  1. You don’t need to carry a balance to have a good credit score. In this case, carrying a balance means only paying the minimum and always owing money to your credit card company.
  2. You do need to be an active user of your credit card if you want to build credit. Making even small purchases on the card on a regular basis and then paying off the balance will have a positive effect on your score, as it will demonstrate you are a responsible user of credit.

What if you can’t pay in full?

If you’ve charged more to your credit card than you can afford, you should at least pay the minimum due, plus as much as you can afford on top of the minimum. Not paying at all or waiting until after the due date will result in major damage to your credit score.

One missed payment reported to the credit bureaus (typically 30 days after the due date) could mean up to 100 points off your credit score. So, if you’ve put yourself in a tough situation, at least pay the minimum by the due date.

One way you can avoid paying interest if you can’t pay your balance off in full is by considering a balance transfer. With a balance transfer, you can pay an intro 0% APR for 15 months or longer. Thus, you can pay your debt off a bit more slowly without incurring wallet-damaging interest. You can review several balance transfer offers here.

Chase Freedom®

The information related to Chase Freedom® has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Chase Freedom®

Regular Purchase APR
14.99% to 23.74% Variable
Intro Purchase APR
0% Intro APR on Purchases for 15 months
Intro BT APR
0% Intro APR on Balance Transfers for 15 months
Annual fee
Rewards Rate
Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories every 3 months. Unlimited 1% cash back on all other purchases.
Balance Transfer Fee
3% when you transfer during the first 60 days of account opening, with a minimum of $5
Credit required


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5 Credit Card Myths Hurting Your Wallet and Credit Score

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There are many myths and rumors out there about how to spend on a credit card, when to pay it off and whether or not to even have a card. Unfortunately, some of these credit card myths, if followed, will cause more harm to your wallet – and your credit score – than good.

Here are five of the most common credit card myths – and the reality.

1. The myth: It’s better to never get a credit card

There is a common misconception that carrying a credit card will ultimately lead to damaging credit card debt. Sure, some people don’t understand how to handle credit cards, and end up overspending and getting into deep, unmanageable debt.

Reality check: For the responsible individual, however, a credit card offers one of the easiest ways to establish and build a credit history.

Instead of just listening to scare tactics, consider your time perspective (which you can test here), responsibility levels and history with debt. If you’re the kind of person who understands how to budget and manage your finances, you can probably handle a credit card. After all, having a credit card in your wallet doesn’t just mysteriously incur debt, but it can  help you improve your credit score.

And remember: Having no debt or payment history at all, which means you will have no credit score, can be just as damaging when you are trying to get a loan as having a low credit score.

2. The myth: Carrying a balance on your credit card helps your score

You may have heard that carrying a balance on your credit card and only paying the minimum due each month will help your credit score, as it shows lenders you have debt and can manage to pay it off, even if slowly.

Reality check: This is 100% untrue.

Each month, you should pay your credit card bill on time and in full. Sure, if you can’t afford to pay off the balance in full, then pay at least the minimum (preferably more than the minimum) on time. But it does not boost your score if you keep the debt and chip away at it slowly.

If you’re carrying a balance on your credit card and paying the minimum month-to-month because you heard you should, you aren’t damaging your score, nor are you improving it. But you are losing money each month in interest to your lender. Why throw away money? And carrying a high balance from month-to-month can actually hurt your score, because you look irresponsible to lenders and have a higher credit utilization rate (the amount of debt you have in relation to your total credit limit). It’s ideal to have a utilization rate below 30%, at least. The lower, the better in this area.

If you’re struggling with credit card debt, consider  a balance transfer to cut the interest rate and cost of paying down the debt.

3. The myth: You should only have one credit card

This myth is linked with the notion that people can’t have a credit card in their wallet without incurring debt. This is valid for some, but not everyone.

If you feel you can’t handle paying off bills on multiple credit cards because you’ll either a) forget b) rack up too many purchases or c) get overwhelmed, then stick with one.

Reality check: If you are organized, responsible and like to take advantage of cashback rewards, however – go ahead and get more than one credit card. This can even help boost your credit score, as it can lower your overall utilization rate.

We recommend finding a card that matches your particular spending habits, which may help you to get money back on your purchases. We make this easy with our cashback rewards tool.

4. The myth: Opening a credit card will drastically lower your credit score

You may believe that opening a new credit card will cause your credit score to automatically plunge.

Reality check: Opening a credit card will only drop your credit score by a handful points. If you have a score resting comfortably in the 700s, this is no big deal.

If you’re in the 500 to 650 range, then you should focus on improving your score, and you likely won’t be eligible for many of the better credit cards, anyhow. Instead, you may need to focus on getting a secured card first, to help improve your score.

One exception to the rule: If you’re applying for a mortgage or another loan, you should hold off on applying for any forms of credit, or doing anything that may cause even a small dip in your score. The higher your credit score when applying for a loan, the lower your interest rate will likely be.

If you are in the market for a new card, here is a roundup of some low-interest credit cards.

5. The myth: You should never accept a credit limit increase

Did you recently get an offer to increase your credit limit? You may think your lender is trying to lure you into a spending trap.

Reality check: You can use a credit limit increase to your advantage.

To understand why, let’s recap how your FICO credit score works:

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • New credit (10%)
  • Types of credit used (10%)

“Amounts owed,” which accounts for 30% of your score, includes utilization. As discussed before, that’s the amount of your credit limit you use. As discussed above, a lower utilization rate is ideal.

Consider this scenario when thinking about getting a credit limit increase:  If you  have only one credit card with a $2,000 credit limit and spend $800 a month on your card, that’s a 40% utilization ratio.

Now let’s say your bank offers you a $1,000 increase on your credit limit. If you keep your monthly spending the same at $800, but have a limit of $3,000, your utilization will decrease to about 27%. This small change should help boost your credit score.

Of course, if you tend to overspend and know you’ll just max out a card with a higher credit limit, you might want to avoid getting an increase. However, the idea that you should never accept an offer to increase your credit limit is simply wrong.

The bottom line

The myths we discussed here should, for once and for all, be vanquished. If you take them as gospel, you may cause unintended harm to your credit score, and end up paying more than you should for items charged to your credit card. The most important thing when it comes to credit cards is being a responsible user and not incurring debt you cannot manage.

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