The Best Ways to Build Credit With a Credit Card

A solid credit history is your ticket to better financial opportunities. Whether you want to buy a car, rent an apartment or purchase a home, your credit score—typically measured via the FICO® Score system—plays a big role.^{Footnote 1} Good credit can help you get good interest rates, which can help you afford more. 

But how do you build credit when you’re just starting out—or recovering from bad credit?

There are several paths to establishing and improving your credit score. One of the best ways to build credit is with a credit card. The more you practice good borrowing and spending habits, the more your credit history will improve. In turn, you’ll be more likely to be approved for loans and lines of credit at better rates.

The Best Ways to Build Credit With a Credit Card

When used responsibly, credit cards are a great way to show lenders that you’re creditworthy. The key is to use your card strategically and consistently. Focus on good habits that positively affect your credit score. 

Here are the best ways to build credit using a credit card.

1. Become an authorized user

When you’re an authorized user on someone else’s credit card account, you’ll get your own card to use. The primary cardholder sets the limit on how much you can charge. You’ll learn how to manage a credit line, while the account holder can earn rewards on what you buy.

2. Apply for a secured credit card

A secured credit card works just like a regular unsecured credit card, but it’s guaranteed upfront by a cash deposit. For example, if you deposit $300 to your secured card, then that’s your credit limit. You can build your credit by making on-time payments and keeping your balance low. Responsible use of a secured credit card can lead to qualifying for unsecured credit cards.

3. Use your card regularly but responsibly

To build credit, you need to use your card. Make small, regular purchases that you can easily afford to pay off. This activity shows credit bureaus that you can manage credit responsibly.

4. Pay your balance on time, every time

Pay credit card companies, utility bills and other accounts on time each month. Always aim to pay off the entire credit card balance to avoid interest charges and build a positive credit history. Try using calendar reminders and tools like automatic payments and money transfers to help avoid late payments. 

5. Keep your credit utilization low

Credit utilization is the percentage of your credit limit you’re using. It has a big impact on your credit score. Keeping the credit utilization ratio low is important. Aim to keep your utilization below 30% of your credit limit. For example, if your limit is $1,000, try not to carry a balance above $300.

6. Increase your credit limit responsibly

As your credit improves, you may qualify for a higher credit limit. This can help lower your credit utilization ratio if you maintain your good spending habits.

Choosing the Right Credit Card to Build Credit

Various credit card issuers offer cards tailored for those with less-than-perfect credit histories. Picking the right credit card for you can boost your credit building in a big way. Your ideal card depends on your current credit situation, financial goals and spending habits. 

Here are 6 card types for building credit, their primary benefits and the kinds of people they can help:

1. Secured credit cards offer easier approval with cash deposit as collateral. They’re ideal for people with no credit or poor credit.
2. Student credit cards are designed for college students, often with lower credit requirements. They’re best for college students building credit for the first time.
3. Store credit cards are usually easier to qualify for, with perks at specific retailers. They’re fitting for regular shoppers at specific stores who want to build credit.
4. Rewards credit cards earn cash back, points or miles on purchases. They’re great for people with some credit history who want to maximize benefits.
5. Low-interest credit cards offer reduced interest rates on balances. They’re ideal for people who might carry a balance occasionally.
6. Credit-builder cards are designed specifically for building credit, often with credit education tools. They’re optimal for people who are focused on improving their credit score.

When choosing a card to build credit, look for features like low or no annual fees and reasonable interest rates. Make sure the lender reports cardholder history to all 3 major credit bureaus—Equifax®, Experian® and TransUnion®.^{Footnote 1} Some cards also offer credit education tools or free credit score access, which can be valuable as you work to build your credit.

How Long Does It Take to Build Credit With a Credit Card?

Building credit with a credit card isn’t an overnight process. The timeline for building credit varies depending on several factors. If you use your card consistently and responsibly, you could see significant improvements in a matter of months.

• 3-6 months: You may see a bump in your credit score or be offered a credit increase.
• 6-12 months: With responsible use, you could see a larger increase in your credit score.
• 12-24 months: You may begin to qualify for better credit products or interest rates.

The pace at which your credit improves can vary based on several key factors. Keep these in mind as you use your credit card to build your credit score:

• Your starting point. If you’re starting with no credit history, it may take longer to build credit compared with someone who’s rebuilding after financial difficulties.
• Your payment history. Consistent on-time payments have the biggest impact on your credit score. Late or missed payments can set you back significantly.
• Your credit utilization. Keeping your credit utilization low (under 30%) can help improve your score faster.
• Your credit mix. Having a mix of credit types (like a credit card and student loans) can positively impact your score.
• Your applications for credit. Applying for multiple credit cards in a short period can result in hard inquiries by lenders and temporarily lower your score.

Patience and consistency are key! Focus on what you can control—like making payments on time and keeping your credit utilization low—and you’ll be on your way to building a solid credit foundation.

6 Common Credit Card Pitfalls to Avoid

Credit cards can be powerful tools for building credit. They also can pose some risks if they’re not used wisely. Keep these tips in mind so you can avoid pitfalls when using your credit card to build your credit profile.

1. Not carefully reading your card’s terms and conditions

Pay attention to the annual percentage rate (APR), annual fees and any clauses about changes to your account terms. Understanding these details helps you use your card more effectively and avoid unexpected charges.

2. Only paying the minimum balance 

If you pay only the minimum amount due each month, you can end up paying a lot in interest over time. Lenders may assume you’re paying the minimum because you’re under financial strain. Aim to pay your balance in full by the due date. Or, pay as much above the minimum as you can afford. 

3. Applying for too many credit cards at once

Applying for several credit cards in a short period can result in multiple hard inquiries, which can temporarily lower your credit score. Spread out credit applications and only apply for cards you’ll have a good chance of qualifying for. 

4. Taking out big cash advances

Using your credit card for cash advances often comes with high fees and interest rates. Cash advances can quickly lead to debt if not managed carefully. Instead, use your debit card for cash withdrawals.

5. Relying on your credit card for emergencies

Paying for emergencies with a credit card can lead to high balances and potential debt if you can’t pay it off quickly. Work on building an emergency savings fund to cover unexpected expenses. Aim to save 3-6 months of your living expenses.

6. Not monitoring your credit regularly

Take advantage of free credit monitoring services and check your full credit report annually. Regular monitoring lets you spot and address issues quickly. This helps ensure your credit report accurately reflects your financial behavior and protects the credit history you’ve worked hard to build.

More Ways to Build Credit Without a Credit Card

Credit cards aren’t the only tools available for building credit. In fact, there are several credit-building strategies that can help you establish a trustworthy credit profile quickly. In addition to responsible credit card use, consider these tactics for improving your credit:

• Make any loan payments on time. This can significantly boost your credit score. If you need help qualifying for a loan, consider asking a trusted person with good credit to co-sign.
• Report your rent payments. If possible, enroll in a rent-reporting service through your property manager or an independent platform to have your positive payment history reflected in your credit file.
• Diversify your credit mix. Using different types of credit accounts responsibly—like credit cards, personal loans and installment loans—can improve your credit score. But don’t open too many new accounts at once.
• Communicate with creditors proactively. If you think you might have trouble making payments due to unexpected financial changes, reach out to your creditors immediately. Many are willing to work with you on payment plans or temporary adjustments to help you avoid hurting your credit.
• Keep a realistic budget. This helps you live within your means and identify potential financial issues before they impact your credit. Use tools like Navy Federal’s budget worksheet to track your income and expenses effectively.

Navy Federal Is Here to Help You Build Your Credit

Building credit is the first step in laying a foundation for lifelong financial stability. Whether you’re just starting your credit journey or looking to improve your credit score, Navy Federal is here to support you. We’ll make sure you’re well-equipped to successfully navigate your credit-building journey with helpful information and resources.

Our range of credit-building tools—from secured credit cards to credit-builder loans—are tailored to help you raise your credit score through responsible borrowing. Plus, our financial advisors are always available to provide personalized guidance and help you make informed decisions about your credit.