How to Build Credit with a Credit Card

How to Build Credit with a Credit Car

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Many people with good credit scores own at least one credit card, with 82% of all credit card holders boasting credit scores of 680 and higher.

When used responsibly, credit cards can be a great tool for building credit. Here’s a complete guide on how to build credit with a credit card.

Table of contents: 

5 Best Ways to Build Credit with a Credit Card

To improve your credit score with a credit card, you need to know how to best use your credit card. Responsible credit card usage is key to boosting your credit—it won’t increase simply because you got a credit card. Here are the five best ways to increase your credit score using a credit card.

1. Pay bills on time

One of the most important parts of having a credit card is paying your credit card bill on time. Payment history is the largest factor in your FICO® score at 35%, which means it can make or break your score. 

Get into the habit of paying your bills on time every month and watch your score grow. Setting up automatic payments for a few days before your bill is due can help make sure you never miss a payment and give a cushion of time for the payment to go through. 

2. Keep your utilization rate low

Your credit utilization rate, or credit utilization ratio, is the amount of credit you’re using divided by the amount of credit available to you (your credit limit). 

Let’s say your credit limit is $500. This is the maximum amount you can spend on your credit card before payments are denied, but that doesn’t mean you should spend that much. 

It’s best for your credit score to keep your utilization rate under 30%—under 10% is even better! This is because the amount of money you owe impacts 30% of your FICO score and the lower this number is, the better. But how much can you actually spend with your credit card? 

If your credit limit is $500, 30% of that is $150. So, you should aim to never have a balance over $150 on your credit card. Even better, shoot for a balance under $50 (10% of your limit).

3. Don’t overspend

You don’t need to carry a balance on your credit card to improve your credit score. Paying off your balance in full every time, not just making the minimum payment, is the best practice. 

Carrying a balance can cost you more in credit card interest and late fees. Plus, it may increase your utilization rate and damage your credit score. Do your best to avoid credit card debt and treat your credit card like a debit card—only spending money you have.

4. Use your card regularly

Using your first credit card requires a delicate balance. You don’t want to spend too much and go over your utilization rate, but if you don’t use it regularly enough, the lender may close your account. Using some of your available credit is one of the best ways to boost your credit. 

The solution is to use your card to make regular, small purchases. This could include purchases like: 

  • Gas
  • Groceries
  • Small, recurring bills 
  • Inexpensive meals

After a while of making these regular purchases and paying them off on time, your credit card provider will probably increase your credit limit, allowing you to spend more with your card. Until then, using your card for these types of purchases can help you establish responsible credit card habits and keep your credit utilization low. 

5. Avoid opening more cards

Every time you apply for a new credit card, the creditor makes a hard inquiry on your credit, which drops your credit score a few points. You’ll be able to earn back those points in the long run, but in most cases, if you apply to a bunch of credit cards at once, those hard inquiries will add up and take a toll on your credit. 

For this reason, you should only apply for one credit card at a time and make sure it’s a good match for you. When you’re first building your credit, it’s best to start small with one card and take your time to practice building credit with it before opening more accounts.

How to Use Credit Cards to Start Building Credit

To recap, here’s a step-by-step guide to increasing your credit score with your first credit card. 

  1. Apply for a credit card you can qualify for.
  2. Connect your bank account for automatic monthly payments.
  3. Make small purchases to use under 30% of your credit limit (under 10% is better).
  4. Pay your balance in full and on time each month.
  5. Avoid opening new credit cards.
  6. Regularly monitor your credit report.

If you’re not sure what kind of credit card to apply for, here are the types of credit cards you can use to start building credit and the advantages of each.

  • Unsecured credit card: An unsecured credit card, or standard credit card, is great if you qualify for one. They don’t require a deposit to use and often offer rewards.
  • Secured credit card: This type of card is great if you can’t get approved for a standard credit card. Secured cards require a deposit but then they work like any other credit card. 
  • Student credit card: If you’re a student, it’s typically easier to qualify for a student card than a standard credit card. These cards can have decent rewards too!
  • Store credit card: Store credit cards can sometimes be easier to qualify for than standard cards. Be sure to choose one for a store you shop at often or can be used at other places besides the specific store.
  • Authorized user for a credit card: A family member or friend can add you as an authorized user on their credit card. You’ll be able to make purchases and receive credit score benefits but won’t be responsible for charges.

How to Build Credit without a Credit Card

If you’re not ready for a credit card or can’t get approved for one, here are some ways to build credit without a credit card

Credit-builder loans

Credit-builder loans are a lot like what they sound like. They’re low-interest rate loans that help borrowers with poor or no credit build credit, and they function differently than your typical loan. 

With a standard loan, you receive the money you’re borrowing upfront, but with a credit builder loan, the money is held in a savings or CD account until you pay it off. This makes it very low-risk for the lender, as your payments are also adding your collateral to the savings account.

You make monthly payments, including interest on the loan, and making these payments on time will help build your credit. Once you pay off the loan, you get all the money back and in some cases, interest if it was incurred while your savings collateral was being held. 

Rent reporting

The three major credit bureaus, Equifax®, Experian® and TransUnion®, only include rent payment information on your credit report if they receive it. Most landlords don’t report this information, but it could benefit your score if you consistently pay your rent on time. 

You can ask your landlord to report your rent payments or find a rent reporting service that will let you submit the information yourself. Ideally, your rent payments should be reported to all three bureaus for maximum impact. 

Passbook loans

This type of loan is very similar to credit-builder loans, except it uses the money you already have in your savings or CD account as collateral. Interest rates for passbook or CD loans are typically lower than credit cards or personal loans. 

Like credit-builder loans, you build credit as you make payments on the loan each month and can access the money once you’ve paid it off. Check that your bank will report your payments to all three credit bureaus before taking out this type of loan.

Building Credit with a Credit Card FAQ

Have more questions about how to use a credit card to build credit? Check out the answers to these common credit card questions.

When should you pay your credit card bill to build credit?

You should pay your credit card bill by its due date, at the very least. Paying your bill early (before the end of your billing period) or making extra payments if you’re planning to carry a balance may help boost your credit score even more since it will reduce your utilization rate.

How fast does a credit card build credit?

While it may take a while to build credit, you can help establish a baseline credit score if you have an account open and active for 6 to 12 months, to allow your FICO® score to be calculated. You may be able to establish a baseline credit score after 6-12 months of making credit card payments on time. With consistent and responsible credit card usage, you should see a positive impact on your credit over time.

Do you need a credit card to build credit?

No, you don’t need a credit card to build credit. Responsible credit card usage is one of the easiest ways to build credit, but it may not be the right answer for everyone. There are other ways to improve your credit score, like taking out loans, reporting rent and utilities or being added as an authorized user to someone else’s credit card.

A credit card is a great way to start building credit. If you’re looking for more ways to boost your credit score, check out our resources on and the features included with ExtraCredit. ExtraCredit is a full- credit score monitoring service that can help you understand what areas of your credit you need to work on to build and maintain your good credit.

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