From the time that you get your first credit card, the three major credit bureaus begin to track your behavior with credit, and you begin to establish your credit history. You may be tempted to go crazy with that first credit card, but if you want to protect your credit rating, you need to learn to use credit responsibly.
What does it mean to use credit responsibly? Opinions vary, but if you follow a few basic guidelines, you will be well on your way to building good credit.
First, get in the habit of only charging what you can afford to pay for. It may be tempting to treat that credit card as free money, which enables you to purchase "big ticket" items that you otherwise wouldn't be able to afford. However, this is a quick way to get in trouble with credit and get in over your head in debt. Before you buy that leather couch or the Xbox 360, do the math and see if it fits in your budget. If you show the bank that you only borrow what you can afford to pay back, you'll find it much easier to borrow again in the future.
Secondly, don't max out your credit limit. Maxing out cards or carrying high balances that are close to the limit is a very bad credit habit. Carrying a high balance not only costs you money in accumulated interest, it brings down your overall credit rating. When the credit bureaus calculate your credit score, one of the things they look at is how much debt you are carrying in relation to the overall credit available to you. If you are carrying a balance that is more than 50% of your total credit limit, your score goes down.
Stick with only one credit card, if you can. Many borrowers get a lot of pre-approved offers from other credit card companies once they begin using that first card. It's tempting to apply for all of them, but it's a bad idea. Many first-time credit card users get themselves in trouble this way, because they accumulate too many cards and then can't keep up with the payments. Stick with one, at least for the first few years. After you've established a good history with that card, most experts advise not having more than 2-3 bank credit cards in order to stay in good standing with the credit bureaus.
And finally, pay your balance in full and on time. Paying off your balance each month makes the credit bureaus very, very happy. If you can't pay off the entire balance, try to pay than the minimum payment each month, and of course, make your payments on time. A history of on-time payments will really help you establish a good credit history.
