Using a credit card responsibly is one of the best ways to build credit history. You should pay on time, every time, and spend only a small portion of your credit limit. With that routine, you can generate an excellent credit score.
We’ll go into how using a credit card to establish credit works, as well as how to apply for your first credit card and use your partner’s or parent’s card as a credit card if you’re not yet ready to handle a credit card of your own.
Yes, one of the best ways to establish a solid credit history and raise your credit score is to use credit cards responsibly. This is due to the fact that credit card activity plays a significant role in determining your credit score, accounting for 30.5 percent of your FICO score and 64.1 percent of your Vantage score.
Here’s how using a credit card can help you build credit:
1, On-Time Payments:
Paying your credit card bill on time every time, is the most crucial factor in building good credit. This demonstrates to lenders that you’re a reliable borrower and can be trusted to repay your debts. Late payments can significantly damage your credit score, so make sure you prioritize timely payments.
2. Low Credit Utilization:
Credit utilization refers to the percentage of your available credit limit that you’re using. Aim to keep your credit utilization below 30% to show lenders you’re not overextending yourself and can manage your credit responsibly.
3. Responsible Credit Card Use:
Regular credit card use shows lenders that you are actively managing your credit and know how to use it responsibly. However, moderation in credit card use is also important. To make sure you can pay off your debt in full each month, stay within your budget and avoid using your credit limit to the maximum.
4. Diversify Your Credit Mix:
Having a variety of credit accounts, including installment loans and credit cards, can also raise your credit score. This shows lenders that you can handle different types of credit responsibly.
5. Choose the Right Credit Card:
When choosing a credit card to build credit, consider options with low interest rates, no annual fees, and rewards programs that align with your spending habits. Secured credit cards are also a great option for individuals with limited or no credit history.
Here are some additional tips for building credit with a credit card:
- Become an authorized user: If you have a family member or friend with good credit, ask to be added as an authorized user on their credit card. This allows you to benefit from their positive credit history and build your own.
- Monitor your credit reports regularly: Check your credit reports from all three major credit bureaus (Experian, Equifax, and TransUnion) to ensure accuracy and identify any potential errors. You can access your free credit reports annually at AnnualCreditReport.com.
- Dispute any errors: If you find any errors in your credit reports, dispute them with the credit bureaus immediately. This can help improve your credit score and ensure your credit history is accurate.
Building good credit takes time and effort, but it’s worth it. You can enhance your credit history and financial prospects by utilizing your credit card sensibly and adhering to these guidelines.
Here are some additional resources that you may find helpful:
- NerdWallet: https://www.nerdwallet.com/article/credit-cards/using-a-credit-card-to-build-your-credit
- LendingTree: https://www.lendingtree.com/credit-cards/articles/use-a-credit-card-to-build-credit/
- Experian: https://www.experian.com/blogs/ask-experian/
- Equifax: https://www.equifax.com/personal/education/credit/
- TransUnion: https://www.transunion.com/credit-help
Remember, building credit is a marathon, not a sprint. Be patient, stay disciplined, and you’ll reap the rewards of a good credit score in the long run.
Becoming an authorized user on someone else’s credit card
Consider requesting to be added as an authorized user to one of your family member’s or close friend’s credit cards if you are unable to obtain credit on your own (or simply don’t want one) but they are responsible with their money.
Becoming an authorized user can quickly boost your credit score. When using multiple cards, the credit reports of the primary cardholder and any authorized users are updated with balances and payment histories. This implies that even if you never use the card yourself, you are effectively “borrowing” your family member’s or friend’s account history if they use it.
On the downside, the primary cardholder is ultimately responsible for any credit card charges you do make. Make sure you’ve worked out the specifics of how to pay back any purchases you make in order to prevent disputes with family or friends. To reduce temptation to overspend on the account, you can even decide that the primary cardholder will hold onto the physical card the issuer sends you.
If you’re ready to move forward after a year or so as an authorized user, you might be able to get approved for your own credit card. In that case, review our recommendations for the best credit cards for beginners.
Build credit with a student card
If you’re a college student, there are credit cards specifically designed to help you build credit history.
One student card that stands out is the Capital One SavorOne Student Cash Rewards Credit Card. With no annual fee and no deposit needed, this card can be obtained by customers with fair to limited credit.
- Receive an infinite amount of 3% cash back on dining, entertainment, popular streaming services, and groceries (not including superstores such as Walmart and Target) and 1% off all other purchases.
- Earn $50 when you spend $100 within the first three months of the Early Spend Bonus.
- Get 2010 percent cash back on purchases made through Uber.
- With $0 Fraud Liability, you can relax knowing that you won’t be held accountable for any unauthorized charges.
- Enjoy no annual fee, foreign transaction fees, or hidden fees
- Get up to 5 percent cash back on hotels and rental cars when you book through Capital One Travel. This is the place where you can find the best deals on thousands of travel options. Terms apply.
- Refer friends and family, and when they’re accepted for a Capital One credit card, you can earn up to $500 annually.
- Get 8% cash back on entertainment purchases when you make reservations via the Capital One entertainment portal.
- Build your credit with responsible card use
- This card could be a possibility for you if you’re enrolled in a community college, four-year university, or another type of higher education.
- Some of the benefits offered by Visa® or Mastercard® for Capital One products listed on this page may differ depending on the specific product. Details can be found in the corresponding Guide to Benefits, as terms and exclusions apply.
Recommended Credit
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Notably, this card comes with a generous cash back program. %20Cardholders%20earn%203%%Cash%20Back%20on%20dining,%20entertainment,%20popular%20streaming%20services, and%20at%20grocery%20stores%20(apart from superstores like Walmart%C2%AE%20and Target%C2%AE); %205%%Cash%20Back%20on%20hotels%20and%20rental%20cars%20booked%20through%20Capital%20Travel%20(terms%20apply); %208%%Cash%20Back%20on%20Capital%20One%20Entertainment%20purchases; %201%%Cash%20Back%20on%20all%20other%20purchases
Still, it comes with a potentially high APR: 19.99% – 29.99% (variable). Check out our review of the
How to Build Credit with Credit Cards
FAQ
Does a credit card build your credit score?
How often should I use my credit card to build credit?
How much credit does a credit card build?
How to use a credit card to build credit?
There are plenty of benefits to knowing how to use a credit card to build credit. Never miss a payment, watch your card balances, be proactive and you’ll see your credit grow. If you’re not sure where to start, use our CardMatch tool to pick a credit card that’s tailored to your credit and fits your needs.
Are credit cards good for building credit?
When used appropriately, credit cards can be powerful credit-building tools. Depending on where you’re starting from, a secured credit card can be a good first step to building strong credit. As you build a strong history with issuers, you may be able to move on to higher-level credit cards.
Can credit cards help you build a good credit score?
Credit cards have the potential to help you build better credit scores when you manage your accounts in a responsible way. In fact, whether you have one credit card or many, it’s possible to earn and keep a good credit score. Yet there are also ways to improve a credit score that don’t involve credit cards.
Can a secured credit card help you build credit?
While both types of credit cards can help you build credit, they have different features and cater to different types of borrowers. Secured credit cards are backed by a security deposit, which the issuing bank requires you to make when you open the account.