Credit Cards » Credit Card Guides » How To Build Credit With A Credit Card?
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How To Build Credit With A Credit Card?

Building your credit with a credit card is easy if you follow some basic rules. Here are the things to do - and what you should avoid.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

Building a positive credit history is an important step towards achieving financial stability. One effective way to do this is by using a credit card responsibly.

However, many people are unsure about the best ways to build credit with a credit card. In this article, we will discuss eight ways to use a credit card to build and improve your credit score.

Making on-time payments can help you build a positive credit history and increase your credit score. This can lead to lower interest rates and better loan terms in the future.

One of the most important factors in building credit with a credit card is making your payments on time. When you make your payments on time, it shows that you are responsible with your finances and can be trusted with credit. To make sure you don't miss a payment, set up automatic payments or set reminders for yourself.

For example, if you have a credit card with a $600 limit, try to keep your balance below $200 and pay off the full balance on time each month.

Becoming an authorized user can help you establish a positive credit history and increase your credit score. This is a good option if you're having trouble getting approved for a credit card on your own.

If you have a friend or family member with a credit card in good standing, ask if you can become an authorized user. This means you'll be able to use their credit card, but you won't be responsible for paying the bill.

However, make sure that the primary cardholder is responsible and that their credit card issuer reports authorized user activity to the credit bureaus.

If you got your first credit card and want to build credit, make sure to choose a credit card issuer that reports to credit bureaus, such as Equifax, Experian, and TransUnion.

This will ensure that your credit history and activity are reported to the credit bureaus, which can help build your credit score.

Using a secured credit card responsibly can build your credit and increase your credit score. This is a good option if you're new to credit or have a poor credit history.

If you're having trouble getting approved for a traditional credit card, consider applying for a secured credit card. These cards require a deposit that serves as collateral, and your credit limit is typically equal to the amount of your deposit. Using a secured credit card responsibly can help you establish a positive credit history.

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A higher credit limit can help you improve your credit utilization ratio, which can improve your credit score. It can also give you more purchasing power and flexibility with your credit card.

Requesting a credit limit increase can help lower your credit utilization ratio and improve your credit score. Contact your credit card issuer and ask if you're eligible for a credit limit increase. Make sure to use your credit card responsibly and pay your bills on time to improve your chances of being approved.

Keeping a low credit utilization ratio can show that you are responsible with credit and can help increase your credit score. If you have a high credit utilization ratio, it can lower your credit score and make it harder to get approved for new credit card.

Your credit utilization ratio is the amount of credit you are using compared to your credit limit. It is recommended to keep your credit utilization ratio below 30% to show that you are using credit responsibly.

For instance, if you have a credit card with a $1,000 limit, try to keep your balance below $300.

low credit utilization ratio help to build credit
Keeping a low credit utilization ratio is one of the most important factors when building credit (Photo by Prostock-studio/Shutterstock)

Setting up balance alerts can help you avoid late payments and keep your credit score in good standing. It can also help you avoid overspending and accruing debt.

Many credit card issuers offer text or email alerts when your balance reaches a certain amount or when your payment is due. For example, you can set up balance alerts for when your credit card balance reaches a certain amount and when your payment is due.

How Fast Does A Credit Card Build Credit?

Building credit with a credit card can take time, as it depends on a variety of factors, including your credit history, payment history, credit utilization ratio, and more. In general, it can take several months to a year or more to see a significant improvement in your credit score.

There are several reasons why building credit with a credit card can take time. For one, credit scores are calculated based on your credit history, which takes time to establish. Additionally, your payment history, credit utilization ratio, and other factors are constantly changing, which can affect your credit score.

What Is The Best Credit Card To Build Credit?

There are several credit cards that are well-suited for building credit. Here are some of the top options and their features, as well as their pros and cons:

Card
Rewards
Bonus
Annual Fee

Discover It Secured review

Discover it® Secured
1-2% 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter and unlimited 1% cash back on all other purchases
Cashback Match™ Discover will match all the cash back you’ve earned at the end of your first year.
$0

citi secured mastercard review

Citi® Secured Mastercard®
None
None
$0

capital_one_secured_mastercard

Capital One Secured Mastercard
N/A
N/A
$0
  • Discover it Secured: Discover it Secured is a secured credit card that requires a minimum security deposit of $200. The card offers cash back rewards on purchases, and Discover matches all cash back earned in the first year. Additionally, the card has no annual fee and reports to all three major credit bureaus.
  • Capital One Secured Mastercard: Capital One Secured Mastercard is another secured credit card option. It has a low minimum security deposit requirement, no annual fee, and reports to all three major credit bureaus. The card also has a path to upgrade to an unsecured card.
  • Citi Secured Mastercard: The Citi Secured Mastercard is a secured credit card that requires a minimum security deposit of $200. The card reports to all three major credit bureaus and has no annual fee. The card also offers some benefits, such as automatic account alerts and zero liability protection. However, the card does not offer rewards or cash back on purchases.

Overall, each of these credit cards has features that make them well-suited for building credit. When choosing a credit card, it's important to consider factors such as rewards, fees, security deposit requirements, and credit reporting to find the card that best meets your needs and goals.

Can You Build Credit With A Debit Card?

No, you cannot build credit with a debit card. While debit cards can be a useful tool for managing your finances, they do not offer the opportunity to build credit.

Debit cards are linked to your checking account and allow you to spend money that you already have. They do not involve borrowing money, which means that debit card usage is not reported to the credit bureaus, and it does not affect your credit score or credit history.

To build credit, you need to use credit products, such as credit cards, loans, or lines of credit, that involve borrowing money and making payments over time. By making payments on time and using credit responsibly, you can establish a positive credit history and improve your credit score.

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Can You Build Credit Without A Credit Card?

Yes, you can build credit without a credit card. While credit cards are a common way to establish and build credit, there are other credit products and strategies you can use to build credit.

One option is to become an authorized user on someone else's credit card. As an authorized user, you can use someone else's credit card, and their credit history will be reflected on your credit report. Just make sure that the primary cardholder is responsible with credit and makes on-time payments.

Another option is to apply for a credit-builder loan. These loans are designed to help you build credit by making payments on time. The lender holds the loan amount in a savings account, and you make monthly payments that are reported to credit bureaus.

You can also consider applying for a secured credit card. These cards require a deposit that serves as collateral, and your credit limit is typically equal to the amount of your deposit. Using a secured credit card responsibly can help you establish a positive credit history.

Finally, paying your bills on time and in full, such as your rent, utilities, and student loan payments, can also help you build credit. While these payments may not be reported to credit bureaus by default, some credit reporting services allow you to add these accounts to your credit report.

FAQs

No, you do not need a credit card to build credit. There are other credit products, such as loans or lines of credit, and strategies, such as becoming an authorized user, that can help you establish and build credit.

A credit builder card is a type of credit card that is designed to help people with limited or poor credit history build credit. These cards typically have low credit limits, high interest rates, and require a security deposit.

Yes, Chime offers a credit builder card that is designed to help people with limited or poor credit history build credit. 

You do not need to make a minimum security deposit to obtain a Chime Credit Builder secured card. Instead, the amount of money that you transfer from your Chime Spending Account to your Credit Builder secured account determines your credit limit for card usage.

Yes, Discover offers several credit cards for people with limited or poor credit history, and they report your payment history to credit bureaus.

Additionally, Discover offers tools and resources to help you monitor and improve your credit score.

Picture of Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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