We’ve worked with a lot of people who have the idea that you should pay off and close all your credit cards to improve your credit score. Some think you shouldn’t get a credit card at all. Most think that if you have bad credit there’s no way to get a credit card anyway. All of these ideas are wrong. Here’s why:

Credit cards are one of the fastest ways to improve your credit, but only if you use them responsibly.

If you’ve read our article about how credit works, you know that your credit score is mostly a reflection of how successful you’ve been at paying your debts and bills. You can show that you’re able to pay bills responsibly with car loans, mortgages, and other types of loans, but it’s usually faster to get a credit card and start using it, showing very quickly that you can manage debt responsibly, and do it in a way that involves more than just a regular car payment or utility bill amount.

It’s Essential That You Use Your Credit Card(s) Responsibly.

What’s this mean? Believe it or not, it DOES mean buying things with your card. But the key thing is that you need to only spend what you can pay off by the end of the month. Again, you have to show on your credit report that you’re able to have credit, use it, and manage it responsibly. But there’s sort of a catch:

You want to maintain a small balance on your credit card (yes, you read that correctly).

While you only want to spend as much as you can completely pay off at the end of the month, you actually do want to maintain what we call a ‘baby balance’ on your card. If you keep a zero balance it can look like you’re not actually using your credit card, and therefore not proving that you can responsibly manage your debts. This is because the credit bureaus don’t see the specifics of how you’ve used your credit card on a given month. All they see is what the credit card companies tell them: how much you owe on your card at the end of the month and whether you made your minimum payment on time. So if you pay your card balance completely every month, on your credit report it will look like you’re not using the card. That’s why we advise keeping a small balance, so when the credit card company reports to the bureaus, it shows a balance, i.e. it shows that you’re using the card.

Keep your debt-to-limit ratio low, but not zero.

Quick primer on debt-to-limit ratio: it means the ratio of how much you owe to your credit limit. If you owe $100 and your credit limit is $1000, your debt-to-limit ratio is 10%. You want to keep the debt-to-limit ratio on your credit card(s) at 10% or lower, but not at 0%, for the reasons we talked about just above. That way you’re showing that you’re using your credit card regularly, but keeping your debt on the card low, like a financially responsible person who deserves a great credit score.

Don’t close your credit card accounts, even if they’re in bad standing.

There’s a thing called credit history that’s a big part of your credit score (learn about it in detail here). It goes like this: To get a good score, your credit report not only needs to show that you can manage your debts responsibly, it needs to show that you can do it over time. The longer you’ve shown responsible debt management, the higher your score. So let’s say you you’ve had a credit card for 2 years, and a car loan for 4 years. You have a total of 6 years of credit history helping you. If you close out that credit card, you now have only 4 years of credit history, which will lower your score.

And one more important point about this: it doesn’t matter if you have a history of late payments on your credit card. Closing it out does not remove them.

You can get a credit card no matter what your credit score.

There are credit card options for any credit score. Some credit card companies will give you a card with a low limit – often about $500. Or there are ‘secured’ credit cards where you have a limit of however much you deposit. They’re not exactly credit cards, but they report to the credit bureaus exactly like a regular card, which is all we actually care about.

Here’s a good list of credit cards for low credit or no credit at all.