How to Start Building Credit with a Credit Card

There are several reasons it’s important to build a credit history¹ — the potential for better interest rates, higher credit limits, smaller deposits, and easier credit approval, to name a few. But where do you start?
 
Using a credit card responsibly can help you build positive credit. But you’ll need to qualify for a credit card first. Luckily, you can apply for some credit cards without a credit score. Here’s what to know to jumpstart the process and find the best credit card for you:

Credit building basics

Once you open credit, your credit issuer reports your credit usage and payment history to the three major credit bureaus (Experian, Equifax, and TransUnion). Each credit bureau collects and stores your personal finance information in your credit report. Your credit score is a three-digit number (calculated based on your credit report) that indicates your creditworthiness. Credit scores generally range from 300 to 850. A higher score signals to lenders that you’re more responsible with credit. And lenders consider your credit score when determining how much money you can borrow and under what terms. Having a good credit history can tip the scales in your favor.

Credit cards that can help you build credit

When you get a credit card, you establish a credit history. You can then begin building positive credit with responsible use, like keeping your balance low and making on-time payments. And the longer you have your credit card account, the better it is for your credit score.

But how can you get approved for a credit card if you’re only beginning to build your credit? The good news is you have options, like getting a secured credit card, a student credit card, or becoming an authorized user on someone else’s credit card.

Building credit with a secured credit card

If you’re trying to establish or repair your credit, a secured card might be a good option. A secured credit card often requires little to no credit history to qualify, and using the card responsibly can help you build credit. A secured card functions like a regular credit card—the only difference is you provide the issuer a security deposit in the amount of your credit card’s spending limit (also known as a credit limit). 

For example, if your card issuer approves you for a $500 credit limit, you’ll need to pay a $500 deposit to open the account. The deposit for a secured card is usually refundable after you establish a track record of on-time payments, which may also qualify you for an unsecured card.

As a bonus, some secured cards offer rewards for your spending. Discover it® Secured Credit Card lets you earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter.⁴ Plus, earn unlimited 1% cash back on all other purchases – automatically.

Building credit with a student credit card

Student credit cards may be a good option if you’re a college student trying to establish credit. Student cards also function the same as regular credit cards, but the approval requirements cater to students lacking a credit history. Depending on your card issuer, student cards may also offer rewards specific to your needs.

One of the most significant benefits of a student credit card is the potential to start building your credit history early. Because credit-scoring models consider the length of your credit history, the earlier you get a credit card, the more points you’ll gain as your credit account ages, provided you use your card responsibly. 

Building credit by becoming an authorized user

Another way to build credit using a credit card is to become an authorized user on someone else’s credit card. Even with bad credit, you can become an authorized user. Here’s how it works: A primary cardholder (often a parent or family member) contacts their credit card company and adds you as an authorized user to their existing credit card account. You receive a personal credit card linked to the account, which you can use to make purchases.

Although you’re not the primary cardholder and you’re not responsible for making payments, the account activity appears on your credit report and helps establish your history. However, it’s important to remember that the primary cardholder and authorized users’ credit scores may see positive or negative changes based on the combined usage. It can help to set clear expectations about making reasonable purchases and timely payments.

Managing your credit card and score

Whether you’re just learning how to build credit or working on a credit reboot, there are tools designed to lend a hand. For example, using a credit card mobile app can help you track your spending and even make a budget.

Staying on top of your credit score can also be helpful. You may find your score on your credit card statement or when you log in to your credit card account online.

The strategies outlined here can help you prepare for a brighter financial future. Because no matter where you are on your borrowing journey, now is the right time to build good credit.