3 Easy Steps — How to Build Credit with a Credit Card

3 Easy Steps — How to Build Credit with a Credit Card
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Brittney Mayer
By: Brittney Mayer
Updated: April 29, 2019
Our popular “How-To” series is for those who seek to improve their subprime credit rating. Our articles follow strict editorial guidelines.

Packed as it is with dense vegetation, making your way through a jungle takes patience, skill, and determination — or, if you’re in a hurry, a good machete and a lot of sweat.

Negotiating the jungle of consumer finance is much the same. You can use cash for everything, which requires the patience, skill, and determination to save up for every purchase before you make it. Or, you can use credit — the metaphorical machete — to make your purchase and get to your destination that much faster.

The flaw in this analogy, of course, is that it takes credit to get credit. Luckily, building credit is fairly simple, especially when you build credit with a credit card. Indeed, you can get started on your credit-building journey by following these three easy steps, starting with finding the right credit card for your adventure.

1. Apply for a Card | 2. Make Purchases | 3. Pay On Time

Step 1: Apply for a Card That Fits Your Needs

Consumers who need to build credit tend to fall into one of two camps: first-timers and been-around-the-blockers. If you’re just starting out building your credit, you’ll actually tend to have more options than those consumers who have poor credit and need to rebuild their credit.

Finding the right card in either case will come down to figuring out what you need, what you want, and — often most importantly — what you’re willing to pay. For example, unsecured cards will tend to be more expensive and/or have fewer perks, while secured cards will require a deposit, and store cards can only be used in certain places.

Secured | Bad Credit | No/Limited Credit | Student | Store

Top “Secured” Credit Cards for Building Credit

Although you can potentially obtain a decent unsecured credit card with a limited credit history, some of the best deals to be found will be in the secured credit card market.

Similarly, while you may find an unsecured card for bad credit with somewhat reasonable fees, secured cards will typically be more affordable, especially considering that your deposit is refundable so long as your account is closed in good standing.

  • Credit lines available from $200 to $5,000. Super Low Fixed 9.99% interest rate on purchases - with no penalty rate.
  • No minimum credit score requirements. We invite all credit types to apply. No processing or application fees.
  • Helps strengthen your credit with responsible card use. Reports to three national bureaus.
  • Fast, easy application process. Choose your credit line and open your Personal Savings Deposit Account to secure your line.
  • See additional Green Dot primor® Visa® Gold Secured Credit Card details
  • Click here for official site, terms, and details
★★★★

4.0

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
8 minutes 9.99% Yes 9.0/10

This card is a competitive option for consumers with bad credit, as it has no minimum credit score or history requirements. It also has a pretty low APR that can help if you absolutely have to carry a balance (yes, you should avoid carrying a balance when possible, but, well, life happens). There is no application fee, though you will have to pay an annual fee.

2. Discover it® Secured

The Discover it® Secured is one of the best secured cards on the market. Not only does the card come without an annual fee, but it also offers cash back rewards on every purchase, with bonus rewards for gas and restaurant purchases.

Discover it® Secured

  • Earn 2% cash back on up to $1,000 in combined gas and grocery purchases each quarter
  • Minimum $200 deposit
  • Pay no annual fee

The minimum deposit amount required to open a Discover it® Secured card is $200, and the size of your deposit will determine your credit limit. Your maximum credit limit, up to $2,500, will be set by Discover based on your qualifications.

3. Capital One® Secured Mastercard

The Capital One® Secured Mastercard is a solid starter card that charges no annual fee. Plus, the minimum deposit amount will vary based on your qualifications, meaning you could get a $200 credit limit for a deposit as low as $49.

Capital One® Secured Mastercard

  • Get an initial $200 credit line after making a security deposit of $49, $99, or $200, determined based on your creditworthiness
  • Pay on time for an increased credit line
  • Pay no annual fee

Cardholders who make their first five payments on time may be eligible for a credit line increase with no additional deposit. This card is also upgradable; cardholders who show responsible credit use may be automatically upgraded to an unsecured card.

Top “Bad Credit” Credit Cards for Building Credit

If building credit is a journey, consumers with bad credit who need to rebuild are effectively starting that journey with an uphill climb — and limited resources. In other words, bad credit means you not only have to build a positive credit history, but you also have to overcome your previous poor credit history.

Worse, your options for credit cards to help you on your journey will be limited — and, often, expensive. Depending on your credit profile, secured credit cards will likely be the best way to keep costs down without sacrificing features. In either case, be sure to cancel any expensive credit-building cards after your score improves.

  • See if you Pre-Qualify without harming your credit score
  • Track your progress with free online access to your Experian credit score, terms apply
  • Looking to rebuild credit? We report to the major credit bureaus monthly
  • Accounts are automatically reviewed for credit line increase opportunities
  • Make paying your bill easier with the ability to choose your payment due date, terms apply
  • Stay in-the-know with customizable account alerts via email and text
  • Receive 1% cash back rewards on eligible purchases, terms apply
  • Enjoy peace of mind with $0 Fraud Liability
  • Click here for official site, terms, and details.
★★★★

4.3

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
8 minutes 20.24% - 26.24% Variable Yes 9.0/10

With its offering of cash back purchase rewards, this card is a rarity among unsecured cards for bad credit. Some applicants may be required to pay an annual fee, however, and the APR can get high for applicants with low credit scores. You can check for pre-qualification before applying to get an idea of the terms you’ll be offered.

  • Credit lines available from $200 to $5,000. Super Low Fixed 9.99% interest rate on purchases - with no penalty rate.
  • No minimum credit score requirements. We invite all credit types to apply. No processing or application fees.
  • Helps strengthen your credit with responsible card use. Reports to three national bureaus.
  • Fast, easy application process. Choose your credit line and open your Personal Savings Deposit Account to secure your line.
  • See additional Green Dot primor® Visa® Gold Secured Credit Card details
  • Click here for official site, terms, and details
★★★★

4.0

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
8 minutes 9.99% Yes 9.0/10

This is an easy-to-get secured card with a low minimum deposit requirement and no minimum credit history or credit score requirements. The annual fee is a bit steep, but it has one of the lowest APRs around, so it could be worthwhile for consumers who know they’ll need to carry a balance from time to time (of course, carrying a balance should be avoided when possible).

  • Receive Your Card More Quickly with New Expedited Processing Option
  • No Credit History or Minimum Credit Score Required for Approval
  • Quick and Complete Online Application
  • Full-Feature Platinum Mastercard® Secured Credit Card
  • Good for Car Rental, Hotels; Anywhere Credit Cards Are Accepted!
  • Monthly Reporting to all 3 Major Credit Bureaus to Establish Credit History
  • Credit Line Secured by Your Fully-Refundable Deposit of $200 -- $2,000 Submitted with Application
  • Just Pay Off Your Balance and Receive Your Deposit Back at Any Time
  • 24/7 Online Access to Your Account
  • Nationwide Program though not yet available in NY, IA, AR, or WI* See Card Terms.
  • Click here for official site, terms, and details.
★★★

3.0

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
9 minutes 20.74% (V) Yes 7.5/10

This card is good for consumers looking for a large credit limit, as you can put down up to the maximum limit without worrying about deposit caps from your credit profile like some other cards. The annual fee is reasonable for a card without minimum credit score requirements, though the APR is high enough that you’ll want to avoid carrying a balance.

Top “No/Limited Credit” Credit Cards for Building Credit

Contrary to common misconception, we don’t start out with perfect credit scores. In fact, we all actually start out with, well, no credit scores. It takes a full six months of credit history before you are eligible for a FICO credit score at all — and some time after that before you’ll reach a good score.

With no or a limited credit history, you’ll need to find a starter card that has no minimum requirements; luckily, it’s usually easier to get an affordable card with no credit than it is to get one with bad credit. That said, while you can find a number of decent unsecured cards for no/limited credit, consider a secured card for better perks and/or lower fees.

7. Capital One® Platinum

With its low-fee, no-frills functionality, the Capital One® Platinum could be the poster-card for starter cards. While the card offers no purchase rewards, it’s still a great first card, as its lack of an annual fee means you can hang on to it indefinitely as you build credit history.

 Capital One® Platinum

  • Make the first five payments on time to unlock a higher credit limit
  • $0 Fraud Liability
  • Pay no annual fee

You may not begin with the highest credit limit if you get this card — hey, it is a starter card, after all — but paying on time for the first five months can unlock a credit limit increase. Capital One is also known for handing out unsolicited limit increases with some regularity.

8. Discover it® Secured

The Discover it® Secured may be a secured card, but it has a low minimum deposit amount, and the perks you can unlock — like purchase rewards and a $0 annual fee — are well worth a look.

Discover it® Secured

  • Earn 2% cash back on up to $1,000 in combined gas and grocery purchases each quarter
  • Minimum $200 deposit
  • Pay no annual fee

The minimum deposit amount required to open a Discover it® Secured card is $200, and the size of your deposit will determine your credit limit. Your maximum credit limit, up to $2,500, will be set by Discover based on your qualifications.

9. Capital One® QuicksilverOne® Cash Rewards Credit Card

The Capital One® QuicksilverOne® Cash Rewards Credit Card is a good choice for cardholders who will use their card frequently; you’ll want to make sure you’ll earn enough in purchase rewards — without spending more than you can afford — to make the annual fee worth paying.

 Capital One® QuicksilverOne® Cash Rewards Credit Card

  • Earn an unlimited 1.5% cash back on every purchase made with your card
  • No deposit required
  • Pay $39 annual fee

Looking at the numbers, you’ll need to spend $2,600 a year on your card to break even on the annual fee. Of course, that’s assuming you use the card responsibly and pay it off in full every month to avoid interest fees.

Top “Student” Credit Cards for Building Credit

It’s long been a fact that consumers tend to stick to brands they know. So, as a student just starting to enter the marketplace, retailers and brands are working hard to attract your loyalty. This means students have access to great products that simply aren’t available to anyone else — like student credit cards.

Student credit cards are ideal to start building credit, as they typically have low fees, lots of perks, and even tend to offer student-specific extras that can add a lot of value to the experience. Think about how you’re most likely to use your card and choose the option that best fits those needs.

10. Discover it® Student Cash Back

The Discover it® Student Cash Back is a great student card, with a full range of bells and whistles, including cash back rewards on every purchase. Plus, earn bonus rewards in rotating categories each quarter.

Discover it® Student Cash Back

  • Earn 5% cash back rewards for purchases on up to $1,500 in qualifying category purchases each activated quarter
  • Earn 1% cash back on everything else
  • Pay no annual fee

While cash back is nice, the card’s other features — like a $0 annual fee and the Good Grades Rewards — can be just as valuable. And don’t overlook the 0% foreign transaction fee, 25-day grace period, and lack of a penalty APR, which are all useful features in a starter card.

11. Bank of America® Cash Rewards for Students

The Bank of America® Cash Rewards for Students is a good pick for students who want to pick their own rewards, offering 3% cash back in a category of your choice.

Bank of America® Cash Rewards for Students

  • Earn 3% cash back in the category of your choice & 2% at grocery stores and wholesale clubs
  • Earn 1% cash back on everything else
  • Pay no annual fee

Categories include gas, online shopping, dining, travel, drug stores, or home improvement/furnishings, and you can pick a new category each month. The card also offers a $0 annual fee and an introductory 0% APR offer.

12. Citi Rewards+℠ Student Card

The Citi Rewards+℠ Student Card has a unique rewards structure that rounds up your rewards points to the nearest 10X points for every purchase. Not bad for a no-annual-fee credit card.

 Citi Rewards+℠ Student Card

  • Rewards for every purchase are rounded up to the nearest 10X points
  • Earn 2X points per $1 on gas and groceries
  • Pay no annual fee

Before rounding up, users earn a base of 2X points per dollar on up to $6,000 in gas station and grocery store purchases each year, and unlimited 1X points per dollar on everything else. New cardholders also get an introductory 0% APR offer and the opportunity to earn a small signup bonus.

Top “Store” Credit Cards for Building Credit

If you’ve ever purchased, well, anything, you’ve probably been asked to sign up for a store credit card. Most store credit cards, particularly those available to applicants with limited or bad credit, are closed-loop cards that can only be used to make purchases with the specific brand on the card.

Additionally, store credit cards tend to have obscenely high APRs and low credit limits, making it tricky to keep your costs and utilization low.

All that being said, some store cards can be obtained despite a rocky credit history, and if the card is for a brand you already frequent — and won’t encourage you to overspend in those stores — then it may be a useful tool for building credit and saving on your purchases.

  • Easy application! Get a credit decision in seconds.
  • Build your credit history – Fingerhut reports to all 3 major credit bureaus
  • Use your line of credit to shop thousands of items from great brands like Samsung, KitchenAid, and DeWalt
  • Not an access card
  • Click here for official site, terms, and details.
★★★★★

4.8

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
5 Minutes See issuer website Yes 9.0/10

Fingerhut.com is an online retail site with roots in the mail-order catalog market of yore. Today, the site offers a huge range of products from popular retailers and brands. You can only use the account to make Fingerhut purchases and prices may be higher than average, but the card has flexible requirements and there are no application or annual fees.

14. Target REDcard

The Target REDcard gives cardholders 5% off at checkout, both in-store and online, when they use their card to pay for eligible Target purchases. Users can also get free shipping on many items at Target.com.

Target REDcard

  • Receive 5% off on all eligible Target purchases at checkout, in-store and online
  • Receive exclusive Target discount offers
  • Pay no annual fee

This card seems to be fairly easy to get with both poor and limited credit, with user reports of being approved with credit scores as low as 580. Keep in mind that a low or no credit score will likely mean a similarly low initial credit limit.

15. Amazon Prime Store Card

The Amazon Prime Store Card is great for users who already have a Prime membership, as Prime members can use the card to earn 5% cash back at Amazon.com. All cardholders also get special financing offers on qualifying purchases, but be aware of the deferred interest.

Amazon Prime Store Card

  • Receive special financing on eligible orders; pay off purchase before end of term to avoid interest
  • Prime cardholders can earn 5% back at Amazon.com
  • Pay no annual card fee (Prime fee may apply)

Some applicants may not qualify for the unsecured product, but may instead be offered the Amazon.com Store Card Credit Builder, which requires a deposit. With responsible use, this card may be upgraded to the unsecured version after seven months.

Step 2: Make Regular Purchases with Your Card

While this step may seem a bit like something that goes without saying, many people have credit cards they simply don’t use. Unfortunately, letting your credit card account lie fallow will not only likely pause most of the credit score growth you could be seeing, but it may even cause your credit scores to take a hit.

That’s because issuers don’t like to see customers with unused credit cards. After all, if you’re not using your cards, the issuer isn’t making any money on the account. Letting your card go unused can cause the issuer to stop making monthly reports to the credit bureaus — after months of nothing to report, can you blame them? — or even to close the account entirely.

Keep a Credit Card Account Active

Of course, the opposite of “never using your credit card” is not “running up a giant balance on your credit card.” The key is to use your credit cards to make a few modest purchases each billing cycle that you can pay in full well before the due date.

Good examples of things to put on your credit card are monthly recurring bills, such as streaming services — e.g., Netflix, Hulu, Spotify — or cellphone bills, that have the same due date every month. This allows you to easily pay off the purchases after they post (and long before your due date), which will help you to avoid late payments.

It’s a common misconception that you need to have a balance reported to the credit bureaus to have your payment history count, or that somehow having a balance will improve your credit score. Neither of these myths are true.

So long as you use your credit card at some point during the statement period, your payment history will be reported, whether you pay in full or not. Which is good news, since paying your balance in full before the due date is the best way to avoid interest fees. Keeping your balance low also benefits your utilization rate, which can be worth up to 30% of your credit score.

Step 3: Pay Your Bill In Full & On Time Each Month

If there is just one rule about consumer credit that you take away, it should be this: Always, always, always pay your debts on time.

Above all else, making your debt payments on time and as agreed is the single most important thing you can do to build and maintain a good credit profile. That’s because your payment history accounts for a full 35% of your FICO credit score calculation and is often the largest factor in whether you’ll be approved for new credit.

When building credit with a credit card, this rule can be extended to not only paying your credit card bill on time — but paying it in full. Paying off your full balance before your due date will allow you to avoid interest payments (so long as your card has a grace period; most do), as well as ensuring you’re never stuck with late payment fees.

Paying your balance in full also helps keep your utilization rate low; your utilization rate is how much of your available credit you are using, and it influences up to 30% of your credit score. A utilization rate below 30% is recommended by most experts, but lower is better.

All that being said, even if you can’t pay your full balance, you need to make at least the minimum required payment each month before your due date. Ideally, of course, you’ll pay more than the minimum required payment — minimum payments aren’t designed to get you out of debt quickly, they’re designed to make money for the credit card issuer.

Minimum Payment Impacts

As the table above shows, even paying an extra $25 a month on top of the minimum payment can drastically reduce the amount of time you spend paying off your balance and the total amount you pay in interest during that time.

Furthermore, try not to wait until the day your bill is due to make a payment. Computer malfunctions, mail delays, and other issues can — and frequently will — cause your payment to post late, and even a day late is still late enough to warrant late fees and, worse, a penalty APR if your card has one.

Most credit card issuers will allow you to make multiple payments in a single billing cycle, so if you’re concerned about making a late payment, consider making at least the minimum required payment as soon as you get the bill. Then, you can make a follow-up payment to clear the rest of your balance without worrying about the entire payment being late.

Additional Tips for Faster Credit Building

So long as you put a little spend on your credit card and pay it off each month, your positive credit history will grow, and so, too, should your credit scores.

On average, six months of on-time payments will be enough to either establish your credit for the first time, or to show a marked improvement in your poor credit score. One year of positive payment history should be enough to give a newcomer a fair to good credit score, or to get a rebuilder out of the subprime credit market.

For the most part, building credit with a credit card is a long-term process that takes time. But, while on-time payments are the cornerstone of success, responsible credit card use doesn’t stop with paying your bill before it’s due; you should also consider some other strategies for smart credit card use.

Treat Your Credit Card Like a Debit Card

The main difference between credit cards and debit cards is where the money comes from when you make a purchase with the card.

With credit cards, that money comes from the bank that issues your card; you’re essentially borrowing that money, and you owe it as debt until you pay it back when you pay your credit card bill. So, you can make purchases even if you don’t actually have the money to pay them off at that time.

With debit cards, that money comes directly from your own bank accounts at the time you make the purchase. If you don’t have enough money in the account to pay for the purchase, the bank denies the transaction and you’re out of luck.

Types of Payment Cards

Using credit cards can have a lot of perks, but, because you can charge things even if you don’t have the cash for them, credit cards can be used to accumulate debt. To avoid this issue, you should treat your credit card like a debit card; that is, you should only use your credit cards to make purchases for which you already have the cash on hand.

Once you make a credit card purchase, put aside the cash you’ll need to pay it off. This may mean physically putting money in an envelope or container, or it could mean transferring money from a checking or savings account to a dedicated bill-paying account.

Either way, you’ll know you have the money to pay your full balance at the end of the cycle, and you’ll also have a tangible way to see how much you’re spending.

Automate Your Payments

Another good reason to only use your credit cards to make purchases when you already have the money on hand is that it allows you to automate your credit card payments. Most online banking platforms will allow you to set up automatic bill payments that will make your credit card payments for you each month.

When you always know you have the money to pay for your purchases, there is little downside to letting the bank handle the tedious work of paying the bill. This not only relieves you of an annoying task, but it also ensures your bill is paid on time every month. For best results, set the automated payment date for at least a few days before your due date.

Apply for New Credit Wisely

A common source of problems for many people is the idea that if one of something is good, then three of it must be better. Unfortunately, about the only things to which this sentiment can be applied are vegetables at dinner and dollars in the bank. For everything else, it’s all very much dependent on the factors involved.

When it comes to credit cards, more is definitely not always better — particularly not when you’re building credit. Sure, one or two credit cards, used responsibly, can be great for building credit. That doesn’t mean that running out and opening multiple new credit cards will help you build credit faster, however.

In fact, opening too many credit cards can hurt your credit, rather than help it, especially if you already have a limited credit history. For one thing, each new credit card application you fill out — whether it’s approved or not — will result in a hard credit inquiry on your reports.

One or two hard inquiries won’t be a problem, but multiple hard credit pulls within a short period of time can cause credit score damage, as creditors (and scoring models) see it as a sign that you may be preparing to take on debt.

Example Account Age Average

Additionally, the combined metrics of the length of your credit history and the average age of all of your credit accounts is worth up to 15% of your credit scores. Each new account you add to the credit profile will reduce your average account age, which can decrease your credit score.

For example, consider Make-Believe Molly, who has a credit profile as described in the table. While Molly’s oldest credit account is a respectable three years and six months, the average age of all of her accounts is less than two years, which is less desirable to many lenders.

This isn’t all to say that you shouldn’t apply for any new credit, or that you can’t have multiple credit cards. However, while you’re in the process of building credit, simply be cognizant of the impacts of opening a new account, and only apply for credit you intend to use. As your credit matures, the less negative impact you’ll see from new accounts.

Is a Credit Card the Best Way to Build Credit?

Technically, you can build a credit history with any type of credit product, be it a credit card, a personal loan, an auto loan, or even a business credit line. Financial products that are not associated with credit — such as debit cards or rental payments — won’t typically help you build credit.

Unfortunately, most credit products will come with significant costs, both in general administrative fees as well as pricey interest fees. While these costs can be worth paying if you need the product (it’s hard to buy a house without a mortgage loan these days), there’s a more affordable option if all you want to do is build credit: credit cards.

With the exception of subprime credit cards and top-tier rewards cards that charge big annual fees, most credit cards are completely free to use when they’re used responsibly. So long as you have a card without an annual fee, you only need to pay your balance in full each month to avoid interest fees.

The biggest problem with using credit cards to build credit is the aura of fear that seems to be associated with them. If you’ve ever had problems with credit card debt, or know anyone who has had problems, it’s easy to demonize credit cards as a whole.

The truth is, as with many tools, credit cards are not inherently good or evil. Credit cards don’t cause debt — people misusing credit cards cause debt. If you are conscientious about selecting a good credit card and you use that card responsibly, you can not only build credit, but you can often do so for free.

How Often Should You Check Your Credit Scores & Reports?

No matter what method you use to build credit, keeping an eye on your credit reports should be a regular part of maintaining your personal finances. Not only is the information in your credit reports used to calculate your credit scores, but it is also used as a part of background checks, insurance evaluations, and other common situations.

If nothing else, you should check your credit reports at least once a year. By law, you are entitled to one free copy of your credit report from each of the main credit bureaus — Equifax, Experian, and TransUnion — once a year, which you can request through the official site, AnnualCreditReport.com.

Credit Report Evaluation Infographic

You should check your credit reports for any errors, outdated information, or potentially fraudulent accounts. Any issues you find should be addressed immediately by filing a dispute with the credit bureau in question. If a mistake or erroneous account shows up on multiple credit reports, you’ll need to dispute the item separately with each bureau.

The main downsides to your free credit reports are that you can only access them once a year without a fee, and that the free reports don’t include your credit scores. If you want to keep a better eye on your credit reports, you can purchase them at any time through the credit bureaus or some third-party sites.

If you’re just interested in monitoring your credit-building progress, however, you shouldn’t need to pay for access to your credit reports or scores. A large number of companies — including most credit card issuers — offer free credit scores and report summaries that will allow you to track your progress.

Additionally, since your credit scores are directly based on your credit reports, they can also be used to monitor your overall credit health. Any drastic changes to your credit scores — particularly drastic decreases in your score — should be investigated and addressed immediately.

Building Credit Can Be Simple with the Right Card

Finding success in any project often comes down to having the right tools, and that is true whether you are traversing a dense jungle or building your consumer credit profile.

Not long ago, building credit wasn’t something about which most people thought. Then, the Fair Credit Reporting Act (FCRA) gave consumers complete access to their personal credit reports, putting consumer credit in the spotlight. Now, in an era when credit reports and scores are used by nearly everyone, building a positive consumer credit profile has become a key aspect of maintaining good personal finances.

As important as it has become to build a healthy credit profile, however, you can’t just pick any old credit product; you can often do more harm than good if you use the wrong tool. And, even if you have the right tool, misusing that tool can do significant damage.

So, if you’re looking for a simple way to build credit, a credit card may be the right tool — if you can use it well. Follow the golden rule of building credit — always, always, always pay on time — and adopt responsible credit habits to ensure you build credit the right way.