Good credit history can play a crucial role when trying to get a mortgage, loan, apartment lease, or credit card. Your credit score is key to determining how much interest you’ll pay. Good credit demonstrates you’ve been financially responsible in the past. So, the higher your score, the more chances you’ll have to get approved for a loan with favorable terms.

Credit History and Credit Scores

The credit scores of Americans may undergo fluctuations over time. Different scoring systems may show slightly different results. FICO scores, which is the most commonly used model, range between 300 to 850. You must handle your credit score responsibly so to build a good credit history.

Your credit score is calculated taking into account several components. Below you can read the components that affect your FICO score:

  1. Payment history – 35% of total credit score
  2. Credit utilization – 30% of total credit score
  3. Length of credit history – 15% of total credit score
  4. New credit accounts – 10% of total credit score
  5. Mix of credit accounts – 10% of total credit score

If you’re interested in the best way to build credit, consider turning to First American Merchant, a reputable business loan provider and processor that specializes in the high risk industry. is a reliable alternative online lender that offers exceptional business funding opportunities to merchants of any type: bad credit isn’t a problem for FAM. With FAM, you can enjoy the most competitive rates and the best merchant funding services in the industry.

Establishing Credit Successfully

Do you know how you can build credit successfully using your credit card? Here are several best practices to follow:

  1. Use a Secured Credit Card

Apply online or at your local bank, and make a deposit of $200-2.000. It works just like a traditional credit card.

  1. Become an Authorized User

Become an authorized user of your family member’s credit card on his/her account. If he/she has good credit, you’ll also start building good credit as an extension of his/her credit history.

  1. Choose the Right Credit Card

Choose the right credit card for you, taking into account things like annual fee, interest rate, credit limit, billing cycle, rewards or cash back, cash advance fee.

  1. Keep Your Balance Low

Your balance-to-credit-limit ratio should be kept around 30% or less.

  1. Pay Off Your Balance in Full Every Month

Pay your balance in full every month and never fail to make on-time payments.

  1. Auto Pay All Your Bills

Set up your household expenses like utility, internet and insurance bills to be paid automatically each month via your credit card account. Log into your credit card account and enable auto pay from your checking account.

  1. Don’t Use Multiple Cards

One account is enough. Applying for multiple credit cards at once can negatively affect your credit score. Also, creditors will consider your account risky.

  1. Keep Your Accounts Open

Don’t open multiple cards and then close them when you’re not using them. Closing any unused accounts negatively affects your credit score.

  1. Avoid the Free Offers That Come with Credit Card Applications

You may be offered free gifts for applying for a credit card. If you think you can cancel the card as soon as you receive it, be aware, these canceled cards will show up on your credit report. Just don’t apply.

Use your credit card responsibly so to improve your credit score and avoid unnecessary debt. Follow the best practices mentioned above so to build good credit with ease.

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