How to Build Credit With a Credit Card

If you have no credit, you probably think it’s nearly impossible to get approved for a credit card, let alone be able to use a credit card to build credit.

It’s likely true you won’t get your top-choice card, but it’s really just a matter of targeting the right ones. And once you have a credit card, you’ll find it’s one of the best ways to build credit.

[Read: Best Starter Credit Cards for Building Credit.]

How to Get Your First Credit Card

Now, I’m not talking about a fancy rewards credit card that gets you into multiple airport lounges. No, your card might have rewards, but you won’t be sitting in a suite sipping free cocktails.

Here’s the thing: It doesn’t matter. Your first credit card is a tool for building credit. That’s your focus for now. The fancy cards can reside in your wallet later.

But what if you aren’t comfortable getting your own credit card right now? Maybe it’s all new to you, and you want to learn the ropes first. You can get started by piggybacking on another person’s credit.

If you have a parent, relative or close friend who has great credit, then becoming an authorized user may be an option. This is called piggybacking because, as an authorized user, you get to build a credit history without having to qualify for your own card.

This arrangement works if you and the account owner have a detailed chat about what you can purchase with the card and what your dollar limit will be. If you purchase too many items with the card, then the account owner’s credit takes a hit. Don’t let that happen. You have a great opportunity to build credit, so track your spending and use the card responsibly.

How to Build Credit With a Credit Card

If you’re ready to take the credit card plunge, get comfortable. We’re going to go over four different options: secured credit cards, student credit cards, unsecured credit cards and retail credit cards.

Secured Credit Cards

When the target market includes people who are trying to build or rebuild their credit, there will always be a few lenders trying to take advantage of this vulnerable group. Read the terms and conditions of secured cards carefully.

But I’ve spent a lot of time researching secured cards, and there are some terrific ones in this category. You should know that applying for a credit card could result in a hard inquiry on your credit report, which usually knocks a few points off your score. Since points are at a premium when you’re new to credit, a few issuers will allow you to get “preapproved” before you apply. The benefit is that if you don’t qualify for the card, you know upfront and you don’t get a hard inquiry with nothing to show for it.

With secured cards, you do have to make a security deposit, and some cards have annual fees. But if you use them responsibly, you can ride these cards straight to the land of fair credit, which is a FICO score between 580 and 669. There are some pretty good unsecured cards available in that category.

Some secured issuers offer unsecured cards, so you might be able to graduate to an unsecured card with the same issuer. But if not, you’ll be in a good position to apply for an unsecured card with another issuer. When you close your secured card account, your security deposit will be refunded to you.

[Read: Best Secured Credit Cards.]

Student Credit Cards

If you’re still in college or grad school, you might qualify for a student credit card. Be aware that many issuers look fondly on good grades. Being a student is hard work, and a good GPA shows your determination and that you have a sense of responsibility.

If you’re under 21, the Credit CARD Act of 2009 requires that you show proof you have enough income to pay your debts. This requirement could be filled with a part-time job, parental support, student loans or other income you receive.

If you don’t have enough income to get approved, you’ll need a co-signer. Only a few issuers allow co-signers on credit cards. If a student card isn’t an option and a secured card doesn’t appeal to you, then consider becoming an authorized user on a parent’s or relative’s credit card to build some credit.

[Read: Best Student Credit Cards.]

Unsecured Credit Cards for No Credit

It’s not impossible to get an unsecured credit card with a limited credit history, but you have to be careful with these cards. They might advertise that almost anyone can get approved, but the costs of using one of these cards can be sky-high. And there are a few that don’t have grace periods, which means you start paying interest the day your purchase is posted to your account.

I usually recommend a top secured card over one of these unsecured cards. If you still want to explore these cards, just be sure you read all the fine print. Maybe even read it three or four times. Unsecured cards for those with zero or bad credit also might offer the chance for preapproval.

Retail Credit Cards

While retail credit cards can help you build credit, they come with downsides. Make sure to read the terms and know what the interest rate is. These cards are much easier to get than most other cards because the interest rates are high and they usually have low credit limits.

Retail credit cards can be useful for getting information about sales or earning rewards when you shop often at a specific store. But do not carry a balance with these credit cards. Compound interest makes your balance grow quickly. Plus, if your balance exceeds 30% of your credit limit, it can damage your credit score.

4 Steps for Building Credit With a Credit Card

The hard part is over. You got your first credit card. Whichever type of card you have, here’s what you need to do to build a stellar credit history and a solid credit score:

Use your credit card. You have to purchase items on credit and pay the bill to develop a payment history. Avoid trying to rack up rewards if your card has a sign-up bonus. Only use your card for expenses you have to make anyway. The goal right now is to build credit and to develop healthy credit habits.

Track your spending. If you do everything but this, you probably won’t stay on budget. You need to know how much you’re spending and where you’re spending it.

Keep a low credit utilization ratio. Available credit makes up 30% of your FICO score. Keep your credit utilization ratio, which is the amount of credit you’ve used compared with the amount you have available, below 10% to boost your score.

Pay bills on time. Payment history is 35% of your FICO score. Yes, it’s a big deal. So pay your credit card balance in full and by the due date. Be aware that it’s a myth that you need to carry a balance to build a great credit score. Pay on time and you can earn a great score without paying interest. If you carry a balance, you’ll end up in debt, which can lower your credit score.

How Long Does It Take to Build Credit?

Do these four simple steps for six months and you’ll generate a FICO score. If your issuer offers a free credit score, you can watch the number go up each month. There are also free educational scores available online.

Your card activity has to be reported to the credit bureaus for this to work, of course. And if it isn’t clear whether the issuer reports your payment history to all three credit bureaus, then call the lender to confirm before you apply for a specific card.

Be patient and persistent. Over time, responsible credit card use will help you build an excellent credit history and a great credit score..

More from U.S. News

What You Need to Know About ‘Free’ Credit Scores

How to Get Preapproved for a Credit Card

How to Build Credit Fast

How to Build Credit With a Credit Card originally appeared on

Update 10/19/22:

Related Categories:

Latest News

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up