Getting a credit card
How to Start Building Credit with a Credit Card contents
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Getting a credit card can help you build credit history and establish a credit score.
If you have bad credit or no credit history, a secured or student credit card may still work for you.
Good credit practices, like making on-time payments, may help your credit score.
Credit history is central to a balanced financial life. With a strong credit history, you may qualify for the best personal loan and credit card options, low interest rates, and higher credit limits. But where do you start, and how do you find the best credit card for the job?
Understanding how to build credit history with a credit card can help you develop responsible habits for a strong financial future. Here’s what you need to know to jumpstart the process.
As you use a credit card, your financial institution, credit union, or credit card issuer typically reports your activity to one of the three major credit bureaus.
Each credit bureau or credit reporting agency collects and stores your payment history, amount of debt, length of credit, credit mix, and new credit within your credit report. Scoring agencies use your credit report to determine your credit score. Credit scores are three-digit numbers that show potential lenders your creditworthiness, or likelihood to repay debts, at a particular moment in time.
Every scoring agency is different, but credit scores generally range from 300 to 850. The higher your score, the better. A good credit score signals to lenders that you’re responsible with debt. A poor credit score, on the other hand, may indicate to lenders that you’re a risky borrower.
Generally, lenders review your credit score and credit report when determining how much money you can borrow and under what terms. A good credit history might make a big difference. With an excellent credit score, you may qualify for a higher credit limit, the best personal loan rates, or exclusive rewards credit cards, depending on other personal finance factors. With a poor credit score, you might not qualify for the best rewards credit cards or loan rates.
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With no harm to your credit score.1
If you don’t yet have credit, don’t panic. You could build a positive credit history by adopting these good credit habits.
Your payment history plays a vital role in determining your credit score. As you begin building your credit history, always make sure you make at least the minimum required credit card payment on time every month. A single missed payment or a history of late payments can do serious damage to your credit score. Plus, your credit card issuer may charge you a fee for late payments.
Maybe you have trouble keeping track of your due dates. You may be able to set up autopay through your card issuer’s mobile or online banking platform. That way, you can automatically pay at least the minimum each month.
A low credit utilization ratio shows lenders that you can manage debt responsibly. Your credit utilization ratio refers to the total portion of your available credit in use at one time. You can find your credit utilization rate by comparing the sum of your outstanding balances to the sum of your credit limits.
To build positive credit history, try to keep your credit card balance low. Whenever possible, it’s a good idea to repay your entire monthly balance. That way, you can keep your credit utilization rate to a minimum and avoid interest charges. If you can’t afford to repay your balance all at once, do your best to pay more than the monthly minimum. Keeping your balances as low as possible may help improve your credit score.
If you already pay your credit card bill on time each month and keep your credit card balance down, you may boost your credit by improving your credit mix. Your credit mix shows lenders that you can manage different types of credit responsibly. Keep in mind that applying for multiple credit cards or loans at one time may hurt your credit, so you should apply only for credit you need and can afford.
For example, maybe you have a well-managed credit card and you’re planning to return to school. A student loan to cover some expenses may improve your credit mix.
Applying for a new credit card may decrease your credit score by a few points at first. But new credit may also improve your score—if you use it responsibly. Your new credit limit increases your overall available credit. As long as you keep your balances low, increasing your available credit can lower your credit utilization ratio.
A credit card may also improve your credit mix if you’ve only managed installment loans, like personal loans, in the past.
The length of your credit history contributes to your credit score. So, the more experience you get managing each credit card account, the better. If you’ve just begun building your credit history, consider credit card features that will benefit you in the long term, like security tools or rewards on your everyday purchases. By keeping that account open, you can improve the length of your credit history over time.
But how do you begin building credit history when you don’t yet have a credit score? Everyone has to start somewhere. Fortunately, you have some options.
There are a few ways to start building your credit score even with no credit history or bad credit history. You may, for example, use a secured credit card, a student credit card, or become an authorized user on someone else’s credit card.
If you’ve never had a credit card before, you may consider a secured credit card. A secured credit card is designed to help people build or rebuild credit history. Typically, a secured card requires little to no credit history to qualify.
A secured card functions like an unsecured credit card. Using either card responsibly may help you build credit history that appears on your credit report. The biggest difference is that when you first open a secured credit card account, you provide the card issuer with a security deposit, usually equal to the card's credit limit.
After you establish a track record of responsible payment history, your card issuer may refund your deposit. Consistent, responsible card management may also qualify you for an unsecured credit card.
For example, with the Discover it® Secured Credit Card, you get your deposit back after six consecutive months of on-time payments and maintaining good status on all your credit accounts.2
A student credit card may be the right fit for a college student trying to establish a credit score. A student card is a type of unsecured credit card designed specifically for students building credit history.
Student cards may come with certain online banking tools to help you build personal finance skills and rewards tailored to college students’ needs. Credit limits on student cards may be relatively low since they’re designed for individuals with both limited credit history and limited income.
Did you know?
Some student cards may offer rewards specific to your needs. For example, with the Discover it® Student Chrome, you can earn 2% Cashback Bonus® at gas stations and restaurants on up to $1,000 in combined purchases each quarter, automatically.3
Another way to build credit history using a credit card is to become an authorized user on someone else’s credit card.
You typically don’t have to complete a credit card application to become an authorized user. A trusted friend or family member can make you an authorized user on their credit card account (if the issuer allows) by contacting the credit card company. Then, the credit card company typically sends you a card in your name linked to the account, which you can use to make purchases.
As an authorized user, you’re not responsible for making payments or managing the account. But as long as the card reports to a major credit bureau, both your activity and the primary cardmember’s activity may appear on both your credit reports, which can help you establish a credit score.
It’s important to remember that the primary cardmember and authorized users’ credit scores may see positive or negative changes based on the combined usage. That means the primary cardmember’s actions might hurt your score, and yours might hurt theirs. It can help to set clear expectations about making reasonable purchases and timely payments.
A credit card can be a valuable tool for building credit history, but that doesn’t mean it’s your only option. An installment loan—like a personal loan, car loan, or student loan—may also help you establish a good credit score if you manage your debt responsibly.
Some lenders offer what’s called a “credit-builder loan” specifically for people who may not have a strong credit history. The Federal Reserve explains that a credit-builder loan works a little differently from a standard loan. Instead of disbursing the funds upfront, the lender deposits them into a savings account. The borrower pays back the loan amount in installments, which are reported to the major credit bureaus. After making all the payments, the borrower receives the funds.
Some services may also allow you to build credit history using existing bills, like your utilities, cell phone, or even rent, by reporting them to a credit bureau so they appear on one of your credit reports.
No matter where you are on your financial journey, now is the right time to build good credit. Equipped with the best credit card for you and healthy financial habits, you can be on your way to an excellent credit score.
Enter to win a $5,000 scholarship for school
Discover® is giving away one $5,000 college scholarship every month until August 2025.4
See Official Rules for sweepstakes eligibility and entry requirements, entry deadlines and drawing dates, details including odds, list of eligible colleges and universities, prize descriptions and an alternate method of entry.4
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