Does paying off a credit card immediately improve your score

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Published Date 10/11/2017

Question: I am 16 and getting a job soon. I am considering getting a credit card and only buying a bottle of pop and a candy bar with it once a month. Then I would pay off that one purchase at the end of the month on time. Would that improve credit my credit?

There are a couple of good answers to your question. Here’s some more information.

Once you can legally have a credit card in your name, you can build your score by using your card regularly and keeping your balance below 30% of the credit limit. Ultimately, you should have three major credit cards that you use with some degree of regularity.

If you have difficulty getting approved for a card, go to your credit union and ask for a secured card. Making a deposit of $500 will get you a credit limit of around $300. You should be sure to tie the card to a bank account so you can pay it off regularly and conveniently. You should also arrange for an automatic payment of the minimum to avoid the occasional wasteful late payment if you overlook a required payment.

When you apply for the card, try to make sure they report to all three bureaus—Equifax, Experian and TransUnion.

You should not spend money that you would not otherwise have spent. You should think of your credit card as a convenience and a way to build a credit history—not as a license to spend. By paying the balance in full each month, you’ll never pay a penny of interest.

After six months or so of on-time payments, the credit union will probably release your securing deposit. Now you’ll have an unsecured card. Over time, you can expect them to raise your credit limit regularly.

Did I mention that you should pay the card in full each month, so you don’t pay any interest? Good. Just checking.

One component of the FICO scoring model is the age of accounts. A 10-year-old account in good standing can add dozens of points to your score. It is unlikely that you have a FICO score at this point, but once you have a card, you’ll begin to appear on the bureaus. Keeping your finances in good order will save you a fortune as you go through life.

A good credit score will also get the best rates for other types of financing. Car loans are dramatically cheaper, and you’ll find that the credit cards available to you have all kinds of goodies, like cash back, airline miles and no annual fees.

Best of luck!

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