The Credit Guy

Starting on the path to building good credit


If you use credit wisely and build a solid credit history when you’re young, you can save yourself a lot of pain and misery down the road

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Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly “The Credit Guy” column, answering reader questions about credit counseling and debt issues.

Question for the expert

Dear Credit Guy,
I am 21 years old and just starting to build my credit. About eight months ago, I purchased a laptop on a new credit card that offered no interest for the first year. I paid off the card in only four months, and it has remained inactive with no balance ever since. I do not plan to ever use this card again as the interest rates are very high. Am I better off to close this card, or leave it open with its positive history? I want to be sure I get off to a good start with my credit, so I would like to ensure that I handle this first account the best way possible. — Ben

Answer for the expert

Dear Ben,
You are to be congratulated on using your first credit card account wisely. You took advantage of an introductory zero percent interest rate credit card and purchased something that you had a plan to repay within the time frame to take advantage of the great interest rate before it expired. So far you have done everything right. I’m glad you wrote to ask about what to do with this credit card now that you have used it for its original purpose. As you have guessed, the card can help you with your credit rating as well as with your laptop purchase.

One of the things that is considered when calculating your credit score is the length of time that you have had your credit accounts. So, if you keep the credit card account open, you will continue to build up time since you opened the account. You might consider using the card for purchases that you will pay off when you receive the statement (to avoid paying the high, non-introductory interest rate) to keep the account in good standing and to add positive payment information to your credit report.

The most important thing to remember about this credit card and all other credit accounts is that you want to keep all information reported to the credit bureaus about them positive. To do so, you need to pay on time and as agreed every month. The mistake that many people new to credit make (and some not so new to credit) is overextending their use of credit.

What you did with the purchase of your laptop is a great way to make credit work for you in a positive manner. The reason it worked so well for you is that you had a plan in place to pay off the balance of your purchase within the introductory interest rate. Had you not planned in advance, you could easily have had a significant portion of your balance still unpaid when the much higher interest rate went into effect. This would have increased the amount you paid for the laptop and potentially caused a problem in making the minimum payment due on the credit card account.

Planning how you will use credit to your advantage without overextending your income is the key to building a positive credit history. It may be that your next step with credit may be a car loan. When you are ready to purchase a car, keep these things in mind to continue your wise use of credit:

  • Always make a substantial down payment — due to the depreciation of vehicles this helps keep you from being upside down (owing more than what the car is worth) in your loan.
  • Borrow only what you can realistically afford to pay each month at the time you take out the loan. Never sign a loan banking on a raise in pay or other increase in income to make the monthly payments

Take care of your credit!

See related:Credit card glossary terms for first-time card users, Can you really afford that car loan?

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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