How To Use Credit Cards to Build Credit

Summary: Used responsibly, credit cards are powerful tools for building credit. Be sure to pay them on time and use a low percent of your credit line for maximum impact.

Use Credit Cards to Build Credit

By Jason Steele

Having a good credit history is extremely important for nearly every aspect of your personal finances. You’ll need good credit to be approved for a home or a car loan, and your credit history can even play a part in your insurance rates and pre-employment background checks. And one of the easiest ways to build credit is with a credit card.

Basic techniques for building credit with a credit card

Every charge you make to a credit card represents a loan, and the payments you make are reported to the three major consumer credit bureaus. When you make your payments on time, and have very little debt, then positive information gets placed in your credit reports. But if you miss payments, or accumulate a lot of debt, then negative information gets put in your file.

Surprisingly, you don’t have to be the primary account holder to use a credit card to build your credit history. When you are an authorized user on someone else’s account, your credit history is tied to theirs. If they make their payments on time, and control their debt, it will actually help your credit score. But if the primary account holder fails to manage his or her credit cards responsibly, then it will hurt your credit history, so be careful. For more information, see Can credit card piggybacking boost your credit score?

How long does it take to build credit with a credit card?

A credit card will report your account balance and payment history every month to the major consumer credit bureaus. When you make on-time payments, and have little debt, more positive information will be added to your credit report.

While there’s no preset time period necessary to build good credit, most people find that it takes about a year of responsible credit use to substantially build your credit history and affect your credit score.

For those who are new to credit, a year of responsible credit use can help to quickly build a good credit history. On the other hand, those with a history of serious credit problems might only be able to raise their credit score in a single year from poor to fair, or from fair to average or good.

If you continue to add negative information from other accounts, such as missed car payments, student loan payments, or other loans, it can erase any gains you’ve made through responsible credit card use.

Choosing a credit card to build credit

When you have poor credit, or a limited credit history, it can be very difficult to be approved for a new credit card. However, there are some credit cards that are designed for people with credit problems to help build their credit history.

These cards will have higher annual fees and interest rates, than most other cards. With these cards, you want to avoid incurring interest charges by paying your monthly statement balances in full, just to build your credit and qualify for a more competitive card.

There are credit cards with more competitive interest rates and fees that are designed for students and others with a limited credit history.

Store charge cards, for example, are available to people with a wide range of credit profiles, and can be an effective way of building credit history.

Gas cards are another good way for those with a limited credit history to build credit. Finally, American Express charge cards can be used to build credit just like any other credit card.

Finally, another option is to use a secured credit card. A secured card works much like a standard, unsecured card, except that you have to submit a refundable security deposit before you can open your account.

With most secured cards the amount of your security deposit becomes your credit limit. But these cards work just like any other standard unsecured card. You’ll receive a monthly statement and you’ll have to make a payment each month. You can avoid interest charges by paying your monthly statement balance in full, or you can choose to carry a balance. And like any other credit card, your secured card’s balance and payment information will be reported to the major consumer credit bureauss.

Once you’re credit has improved significantly, you may be offered a standard unsecured card, and a refund of your security deposit.

A secured card will have higher interest rates and fees compared to the most competitive cards designed for those with good or excellent credit. But at the same time, secured cards will still have lower annual fees and lower interest rates than standard, unsecured cards designed for people with poor credit.

Can you build credit with a debit or prepaid card?

In contrast to credit cards, charges made to a debit or prepaid card aren’t loans as they use funds that are deducted from what you already have in your account. With debit cards, there are no payments to make, and nothing good or bad ever gets reported to the credit bureaus. Therefore, you can’t use debit or prepaid cards to build credit.

Bottom line

Credit cards are powerful tools, and like any tool, they must be used responsibly to get the most benefit. By paying your bills on-time, and carrying very little debt, you can use a credit card to build credit faster than you might have thought possible.

About the author

Jason Steele is a leading expert on credit cards. His work has been featured on Business Insider, MSN Money and Yahoo! Finance, as well as on The Points Guy.

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Written on December 10, 2018
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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