How to Build Credit With a Credit Card | LendingTree (2024)

June 29, 2022

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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 delve into how building credit with a credit card works, as well as consider how you can get your first credit card or piggyback off a parent’s or partner’s card if you’re not ready to manage a credit card of your own just yet.

5 steps to build credit with a credit card

You build credit through responsible management of a credit product, like a credit card or a loan. The lender will report your behavior to the three major consumer credit bureaus — Equifax, Experian and TransUnion — which each maintain a credit report with your history. While your credit reports don’t contain your credit score, your score is generated from information in your reports. Here are five tips to build credit with a credit card:

1. Pay on time, every time (35% of your FICO score)

Paying on time is the most important factor in building good credit. Payment history makes up 35% of your FICO Score (the credit scoring model typically used by lenders) and 41% of your VantageScore.

We always recommend paying off your credit card in full, as doing so typically allows you to avoid interest charges via a grace period. But if you can’t pay off the full balance, make at least the minimum monthly payment due — that will prevent the issuer from reporting a late payment to the credit bureaus.

If you miss a due date, make the payment as quickly as possible. Issuers generally don’t report you as late to the bureaus until you’re 30 or sometimes even 60 days past due, so you can protect your score by paying promptly.

2. Keep your utilization low (30% of your FICO score)

It’s a good rule of thumb to keep your credit utilization at 30% or lower. When you get close to maxing out your card, issuers might take that as a sign you’re at risk of being unable to pay back what you’re borrowing.

Utilization, or utilization ratio, is a fancy term for how much of your credit limit you’re using. For example, if you’re carrying a $150 balance on a credit card with a $500 credit limit, that’s 30% utilization.

Utilization is calculated for both each individual card and across all your credit cards as a whole. For example, carrying $150 on a card with a $500 limit and $600 on a card with a $1,000 limit would be 50% overall utilization.

3. Limit new credit applications (15% of your FICO score)

You should be careful before applying for new credit cards, and keep a limit on the number of new accounts that you open.

Length of credit history makes up 15% of your FICO Score. Part of this is the average age of your accounts, which goes down every time you open a new one. Plus, when you apply for new credit, that generates a hard inquiry — which could knock your credit score down about five to 10 points.

Applying for new credit judiciously will allow you to maintain a longer average age of accounts while limiting the number of inquiries on your credit reports. This will also help you avoid sending up a flag to potential lenders: Applying for new credit too often can indicate to lenders that you’re desperate, which makes you a risky borrower.

4. Use your card regularly

While you’ll want to avoid spending more on your new account than you can afford to pay off, you should make regular purchases on your credit card.

Issuers like to see you’re using your credit card, not leaving it dormant. Plus, the “length of credit history” factor in your FICO Score takes into consideration how long it has been since you’ve used specific accounts.

You don’t have to spend a lot on your credit card to build credit. One way to build credit while keeping your balance under control is to charge a small, recurring transaction to your credit card, like a monthly streaming subscription — then, set up autopay so you never miss a payment. Even if you tuck the card away, those monthly transactions and on-time payments should help you on your journey to a good credit score.

5. Increase your credit limit

Another way to lower your credit utilization is to increase your credit limit. A higher credit limit gives you more flexibility to spend without dramatically increasing your utilization ratio.

It may not be possible to boost your credit limit right away. New cardholders usually start with a low credit limit — especially with a secured card, where your deposit determines your limit. Think of this step as a long-term goal, rather than an immediate one.

With time and responsible behavior, you can likely increase your credit limit. Some issuers of secured cards offer the chance to get your deposit back and graduate to an unsecured card. And, typically, you can periodically request a higher credit limit with an unsecured card. You may be able to do this in your online account or by calling the customer service number on the back of your card.

Getting your first credit card

It’s important to select the right credit card to apply for when you have limited credit history or perhaps no credit at all. While many of the credit cards with the most lucrative rewards require good to excellent credit, there are cards that are more friendly to people new to credit — including secured cards, student cards and store cards.

Build credit with a secured card

If you have a poor credit score, or no credit history at all, a secured credit card is probably a good choice. It’s “secured” because you’ll need to submit a security deposit to the issuer in the amount of your desired credit limit. This protects the issuer if you default, so secured cards are usually accessible even with limited or bad credit.

One secured card that stands out is the Discover it^® Secured Credit Card. A deposit between $200 and $2,500 is required, the annual fee is $0 and the card is accessible to consumers with poor/limited credit.

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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

| Disclosures

Discover it^® Secured Credit Card

Apply Now

on Discover's secure site

Discover it^® Secured Credit Card

Intro Purchase APR N/A

Regular Purchase APR 28.24% Variable APR

Annual Fee $0

Rewards Rate 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically

Highlights

• No credit score required to apply.
• No Annual Fee, earn cash back, and build your credit history
• Your secured credit card requires a refundable security deposit, and your credit line will equal your deposit amount, starting at $200. Bank information must be provided when submitting your deposit.
• Automatic reviews starting at 7 months to see if we can transition you to an unsecured line of credit and return your deposit.
• Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
• Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
• Get an alert if we find your Social Security number on any of thousands of Dark Web sites. Activate for free.
• Click through to Discover’s website to see terms and conditions.

Typical Credit Needed

300 600

Poor/Limited

Get my free score

Plus, it earns cash back in useful categories: Cardholders earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically.

However, this card’s APR is high, at 28.24% Variable APR.

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. No deposit is required, the annual fee is $0 and the card is accessible to consumers with fair/limited credit.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

| Disclosures

Capital One SavorOne Student Cash Rewards Credit Card

Apply Now

on Capital One's secure site

Rates & Fees

Capital One SavorOne Student Cash Rewards Credit Card

Intro Purchase APR N/A

Regular Purchase APR 19.99% - 29.99% (Variable)

Annual Fee $0

Rewards Rate 3% Cash Back on dining and at grocery stores (excluding superstores like Walmart® and Target®); 3% Cash Back on popular streaming services and entertainment; 8% Cash Back on Capital One Entertainment purchases; 1% Cash Back on all other purchases

Highlights

• Earn unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores (excluding superstores like Walmart® and Target®), with 1% on all other purchases
• Early Spend Bonus: Earn $50 when you spend $100 in the first three months
• Earn 10% cash back on purchases made through Uber & Uber Eats, plus complimentary Uber One membership statement credits through 11/14/2024
• Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
• Enjoy no annual fee, foreign transaction fees, or hidden fees
• Lock your card in the Capital One Mobile app if it's misplaced, lost or stolen
• Earn up to $500 a year by referring friends and family when they're approved for a Capital One credit card
• Earn 8% cash back on entertainment purchases when you book through the Capital One Entertainment portal
• Build your credit with responsible card use
• Whether you're at a 4-year university, community college or other higher education institution, this card might be an option for you
• For Capital One products listed on this page, some of the benefits are provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply

Typical Credit Needed

600 660

Fair/Limited

Get my free score

Notably, this card comes with a generous cash back program. Cardholders earn 3% Cash Back on dining and at grocery stores (excluding superstores like Walmart® and Target®); 3% Cash Back on popular streaming services and entertainment; 8% Cash Back on Capital One Entertainment purchases; 1% Cash Back on all other purchases.

Still, it comes with a potentially high APR: 19.99% - 29.99% (variable).

Build credit with a store card

If you’ve ever been asked when checking out at a store if you want to apply for that brand’s credit card, or if you’ve been offered the chance to start a credit card application during your Amazon checkout process, you’re already familiar with store credit cards. The good news is that store cards can help build credit, and often have less stringent requirements than some other credit cards. The bad news, however, is that they often come with rewards programs that seem designed to get you to spend more than you otherwise would at the store, as well as sky-high interest rates.

One store card that stands out is the Target REDcard™ Credit Card. It doesn’t require a deposit, the annual fee is $0 and the card is available to consumers with good credit. And if you shop at Target even occasionally, this card can save you money — cardholders get 5% off at Target in-store and online, applied when you check out.

The APR is high at 27.65%.

The information related to Target REDcard™ Credit Card has been independently collected by LendingTree and has not been reviewed or provided by the issuer of this card prior to publication.

Becoming an authorized user on someone else's credit card

If you can’t qualify for your own credit card (or just don’t want one), but you have a family member or close friend who manages their finances responsibly, you might consider asking to be added to one of their cards as an authorized user.

Becoming an authorized user can quickly boost your credit score. With many cards, balances and payment history get added to the credit reports of both the primary cardholder and the authorized user. That means if your family member or friend is using the card, you’re essentially “borrowing” their history with that account — even if you never use the card yourself.

On the downside, the primary cardholder is ultimately responsible for any credit card charges you do make. To avoid conflict with family or friends, ensure you’ve worked out the details of how to pay back any purchases you make. You can even agree that the primary cardholder will keep hold of the physical card the issuer sends you, to avoid any temptation to overspend on the account.

After a year or so of being an authorized user, if you feel ready to take the next step, you may be able to qualify for a credit card of your own. In that case, review our recommendations for the best credit cards for beginners.

Not all credit cards report information for authorized users. If you’re unsure, ask the primary cardholder to call the number on the back of their card and check with the issuer. It won’t help you build credit if you’re added as an authorized user, but the issuer isn’t providing the spending and payment activity to your credit reports.

Can you build credit without a credit card?

Yes, it’s possible to build credit without a credit card, though using a credit card responsibly is one way to build credit relatively quickly. Here are a few methods:

• Other types of loans. If you’re making payments on student loans, auto loans or personal loans, that will build credit history.
• Experian Boost. This is a free service offered by the credit bureau Experian, meant to help those with low credit scores or limited credit history build credit. With Experian Boost, certain payments that wouldn’t normally count toward your credit history — Netflix, utilities and your phone bill, for example — can build credit and potentially improve your credit score. The caveat is that you’ll only be building credit history with Experian, not with the other two bureaus.
• Credit builder loans. Similar to a secured credit card, a credit builder loan requires you to make a deposit into a savings account or certificate of deposit (CD). You’ll then make installments payments on the loan, which are reported to the credit bureaus.

If you’re concerned a credit card will lead to the temptation to overspend, consider putting a small, recurring charge on your card, setting up autopay and then locking the card away. That way, you won’t run the risk of accruing a large balance — but you’ll still get the benefit of monthly spending and payments being reported to the bureaus.

For Capital One products listed on this page, some of the above benefits are provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply

Glen Luke Flanagan

• Expertise: Personal finance, credit scoring, credit cards
• Education: Radford University, East Carolina University

Glen Luke Flanagan is a former senior credit card writer for LendingTree. He joined the team in June 2019, and covered topics that included new credit cards, how your credit score works and what you need to know about credit card interest.

Before joining LendingTree, Glen worked in journalism and government communications. As a journalist at newspapers in North Carolina and South Carolina, his reporting won awards from the North Carolina Press Association and the South Carolina Press Association, respectively.

Glen earned his bachelor’s degree in media studies with a concentration in journalism from Radford University, graduating summa cum laude in May 2014. He also earned a master’s degree in English with a concentration in technical and professional communication, as well as a graduate certificate in marketing, from East Carolina University in May 2022.

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