Which method is a common way to build a credit history?

Building a credit history is essential for establishing a good credit score, which can impact loan approvals, interest rates, and rental applications. One of the most effective ways to build a credit history is by consistently paying off credit cards on time. This practice demonstrates to creditors that you are responsible with your borrowing and repayment habits, which is crucial for your creditworthiness. Each payment made on time is reported to credit bureaus, contributing positively to your credit score.

Using a debit card for all purchases does not contribute to building a credit history because debit cards do not involve borrowing money. Similarly, keeping cash savings only does not establish any credit activity, as it lacks any borrowing or repayment aspect. Closing accounts after every use is counterproductive because it can negatively impact your credit utilization ratio and reduce the average age of accounts, both of which are factors in calculating your credit score. Therefore, consistently paying off credit cards on time is the most effective method for building a positive credit history.