How to Build Credit With a Credit Card

Credit cards aren’t always top of mind for building credit. But when used responsibly, they can be a highly effective tool to improve or build credit. The key is to do so carefully – and with a disciplined plan.

If you’re interested in building credit with a credit card, you may not know where or how to start. From types of cards to explore to how to use them, our guide can get you on the road to strong credit and good credit habits.

Secured credit cards

Whether you have no credit or low credit, secured credit cards can help you build credit while laying the groundwork for responsible credit management.

With conventional cards, you borrow money from the lender. Secured credit cards require a refundable security deposit from the borrower, which presents less risk for lenders while providing an option for those interested in building or repairing their credit.

Here’s how they work: When you apply, you’ll be asked to place a refundable security deposit with the credit card issuer. If approved, you’ll borrow against that amount. For example, a $200 deposit would allow you to borrow up to $200.

While you’re technically borrowing against your own money, opening a secured credit card can provide the opportunity to make on-time monthly payments, which, when done regularly, can help build or improve your credit score. Once you demonstrate responsible credit management for an extended period of time, many card issuers refund your security deposit and raise your credit limit.

Store credit cards

Store credit cards can also be a good option for building credit, but they come with risks. While they’re usually easier to qualify for – and typically feature sizable introductory store discounts – they also can feature high APRs, low credit limits and something called deferred interest, which you could owe after introductory 0% interest rates end.

If you opt for a store credit card to build credit, your best bet is to pay off the balance as soon as possible. Play your cards right (no pun intended!), and you may wind up helping your credit, plus get some nice store discounts along the way.

Reward credit cards

Reward credit cards can also be beneficial to your credit when used wisely. While reward categories vary (airline “miles” and other points-based rewards are popular options), many offer a percentage cash back, usually somewhere between 1-5%. Other cards may reward you for being a good customer by increasing your credit limit or lowering your interest rate over time.

If you choose a cash back rewards card, and pay off your balance in full each month, you can not only build credit, you can use the extra cash to supplement your budget or pay down other bills.

Ways Using a Credit Card Can Help Build Credit

Once you have a credit card, you can plan to start using it responsibly to help build credit. Here are some guidelines to help you get started – and keep you on track.

• Use the card to make purchases
  Simply having a credit card isn’t enough. You have to make purchases, then pay them off, so lenders can see you’re a responsible borrower that pays back debt. As you plan out purchases, remember to use your card sparingly. Even just buying something you’ve already budgeted for, such as groceries or gas, once a month will do the trick.

• Keep the balance low
  An important part of credit management is keeping your card balance low. This also helps improve your credit utilization rate, an important factor of your credit score.
  
  Avoid the urge to go on a spending spree and be smart with your new card. Remember that credit cards are not free money. While the best practice with a credit card is to pay the full amount each month, it may not always work out that way. So plan to keep your balance low.

• Pay on time and in full
  Paying your bills on time is crucial to building positive credit, so be sure to always pay on time – even a few days early if you can. Most cards come with a predetermined monthly payment date, but you may be able to change it to better fit your pay cycle You can also see if you can set up automatic payments so you don't have to worry about paying late.
  
  One of the golden rules about successfully using a credit card to build credit is paying in full each month. Set your own monthly limit so you won’t exceed your budget. And be sure to always stick to it, even if your card issuer raises your credit limit.

• Don’t apply for more credit too soon
  After you’ve successfully applied and received your credit card, it’s likely that you’ll start getting offers for additional cards, as well as personal and auto loans.
  
  It’s tempting to apply for these cards, or borrow the money, but it’s in your best interest not to. Getting too much credit too soon puts you at risk to fall behind on bills. It can also have a negative impact on your credit report, which can lead to a lower score.¹

How long does it take to build credit with a credit card?

While it may take you several months to start building credit, if you use your new card wisely, make payments on time and check your credit regularly, you'll see your hard work start to pay off."

Remember that even just one late payment can negatively affect your credit score, so keep on top of your balance – and your payments.

Slow and steady wins the race

Building credit, or repairing it, doesn’t happen overnight. But with the right tools, a well-executed plan and patience, it can happen. And success will be that much sweeter.

---

1. FICO. “What Is New Credit?” myFICO.com https://www.myfico.com/credit-education/credit-scores/new-credit (accessed June 17, 2021).

John Frizzera, Jr contributed to this article.