If you do not have any open credit, you still want to pay attention to this...
It's all about control! Knowing how to use credit effectively is key to building a strong file.
For example, you may have been told in the past to get a credit card and max it out while making payments, or conversely you may have been told to pay credit cards off and close them.
Well for a good credit score both are wrong and both are right.
Confused? Let me explain...
You do want to use your credit card regularly.
But not by charging dinner, clothes or a brand new 52" HDTV.
You want to limit your charges to once a month and to no more than 20% of the limit.
Meaning that if your credit limit is $500 then you should never charge more than $100.
Just as important is this tip: never charge more than you can pay off each month.
You see the idea here is to charge something and then pay the balance off each month.
Since the credit card companies report the balance you owe at the time you are billed, doing this each month will always show activity but you will pay no finance charges! However by keeping your monthly charges low (fill your gas tank up once a month and put the card away) and paying it off each month, you will show that you are using credit wisely, not living off of credit, and your scores will reflect that.
It really is that simple.
So you see, both of the conflicting ideas work together to create a solid credit file.
Use the card and pay it off...
both every month.
If you can't pay it off completely, try your best to get the balance under that 20% level.