How to Use a Credit Card to Build Credit

A woman has a surprised look on her face as she holds up her credit card and points at it with a light blue background behind her.

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Credit cards offer one of the best ways for you to build your credit and improve your credit scores by showing how you manage credit on a regular basis. If you want to build good credit, use credit cards regularly while making all your payments on time and using a small portion of your card's credit limit. Here's what you need to know.

Starting to Build Credit With a Credit Card

Credit cards help you build credit because credit card issuers typically report your account and activity to the national credit bureaus—Experian, TransUnion and Equifax. The bureaus then use this information to create your credit reports, which are the basis of your credit scores.

To start building credit with a card, you'll need to either open a credit card of your own or become an authorized user on someone else's credit card. Getting a card of your own can be difficult if you've never had credit before, or if you have poor credit. However, there are options.

  • Secured credit cards are often a stepping stone if you're starting to build or rebuild your credit. These cards function like normal credit cards, but you'll have to send the card issuer a refundable security deposit when you open your account. Secured cards may have high fees and don't necessarily offer great cardholder benefits, but responsible use can help you qualify for better credit cards later.
  • A student credit card can also be a good first option if you're a student. Student cards tend to have low credit limits; however, there are student cards available that have few fees and offer rewards on purchases.

You can also ask a friend or family member to add you as an authorized user on one of their credit cards. When they do, their credit card company can report the account to the bureaus under your name as well. You'll get your own card and can make purchases, as long as the primary cardholder agrees.

Having another person's card as part of your credit history can help you build credit—as long as the primary user manages their card well. Your credit won't be helped if the primary cardholder doesn't make payments on time, for example.

Once you begin building good credit of your own, it may be easier to get approved for different types of unsecured credit cards.

What Are the Best Ways to Use a Credit Card to Build Credit?

A credit card can either help you build positive credit or hurt your credit—it all depends on how you use it. To work your way toward excellent credit scores, focus on making on-time payments and avoid maxing out your card. Here are the best ways to use your credit card to your benefit:

Pay Your Bill on Time

The most important factor in your credit scores is payment history. To build credit with your credit card, make at least your minimum payment on time every month. If you miss your bill's due date, the card issuer may charge you a fee and you could lose any introductory or promotional interest rates on your account.

One of the best ways to ensure you never miss a payment is to set up autopay on your account. You can make the minimum payment using autopay, then pay the remaining balance, or as much as you can, separately.

If you make a late payment, the credit card company can report your account as late to the credit bureaus once it's 30 days past due. A late payment is a negative mark that can hurt your credit scores and stay on your credit report for up to seven years.

Maintain a Low Utilization Rate

Your credit card's balance relative to its credit limit is also an important factor in your credit score. Credit scoring models use the balance and credit limit as they appear on your credit report to calculate your credit utilization ratio. Low utilization (which can be achieved with a low balance) is better for your credit.

Limiting your card use, especially when you have a low credit limit, could help you maintain a low utilization rate. If you use your card often or for a large purchase, you can lower your reported balance by paying down your card's balance before the end of your statement period—about 21 to 25 days before your bill's due date.

There's no perfect utilization rate, but aim to keep it below 10% for the best credit scores.

How to Build Credit Without a Credit Card

While opening and using credit cards can be a good way to build credit, they're not the only option. Loans and other types of accounts can also help if they're reported to the credit bureaus.

When you're starting out, you could look into credit-builder loans, which are designed specifically for this purpose. Other common loans, such as student, auto and mortgage loans can also help you build credit.

As with credit cards, making payments on time with loans is the most important factor in building credit. Your remaining balance can also impact your scores, but it's not as important as utilization rates on credit cards.

Other types of accounts, such as utility and phone plans, often don't get reported to the bureaus or impact your credit. However, Experian Boost®ø is a free service that allows you to add your phone and utility accounts to your Experian credit report so they can help you build credit. There are also rent reporting services that you may be able to use to add your rent payments to your credit reports. As mentioned, there are several other ways to build credit, with no credit history.

Build and Monitor Your Credit

Whether you're starting with a credit card or using a loan to build credit, you can monitor your progress by tracking your credit report and score online. While there are many credit myths, Experian offers free access to your credit report and a FICO® Score for free, as well as ongoing credit monitoring and alerts if there's any suspicious activity so that you know what is going on with your credit. You can see which information gets reported, how your score changes over time and receive personalized suggestions for how to improve your credit.

Learn More About Building Credit With Credit Cards

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