For a balanced financial life, it’s vital to build credit history. 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?
How to Start Building Credit with a Credit Card
7 min read
Last Updated: November 7, 2024
Table of contents
Key Takeaways
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Getting a credit card can help you establish credit history, one factor used to calculate your credit score.
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If you have bad credit or no credit history, a secured or student credit card may still be an option.
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Good credit practices, like making on-time payments, can help your credit score.
Understanding how to build credit 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.
How credit cards build your credit score
Once you begin using a credit card, your financial institution, credit union, or credit card issuer typically reports your activity to one of the three major credit bureaus (Experian®, Equifax®, and TransUnion).
Each credit bureau 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.
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 credit. Poor credit, 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 the best personal loan rates or the best travel 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.
Best ways to build credit using a credit card
If you don’t yet have credit, don’t panic. You can build a positive credit history by adopting these responsible habits:
Pay bills on time
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.
Keep your balances low
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 can help improve your credit score.
Improve your credit mix
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.
Credit cards that can help you build credit
The length of your credit history contributes to your credit score. So, the more experience you get managing each credit card account, the better. But how do you begin building credit history when you don’t yet have a credit score?
There are a few ways to get a credit card and 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.
Let's take a deeper look at each of the options:
Building credit with a secured 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 can help you build credit history that appears on your credit report. The only 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 6 consecutive months of on-time payments and maintaining good status on all your credit accounts. After 7 months, we begin automatic monthly account reviews to see if you qualify to upgrade to an unsecured card and get your deposit back.1
Use a student credit card to build credit
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. A student card might have a smaller credit limit than other unsecured cards.
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.2
Build credit by becoming an authorized user
Another way to build credit history using a credit card is to become an authorized user on someone else’s credit card.
To be an authorized user, the primary cardmember (often a parent or family member) can contact their credit card company and add you to their existing credit card account. You receive a credit card (with your name) linked to the account and can use it to make purchases.
As an authorized user, you’re not responsible for making payments. However, all account activity may appear on your credit report. This might help you establish your credit history if the card issuer reports to a major credit bureau.
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.
Using credit cards to build credit
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 2025.3
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.3
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