Using a credit card is one of the easiest ways to build your credit score, assuming you use it responsibly. The revolving-credit trade line will help you establish a pattern of payment behavior and credit use, which have the most influence on your credit score, and there are a few simple things you can do with your card to make sure you’re building a strong credit score.
How to Get a Credit Card & a Good Credit Score
Of course, you need a credit card to employ card-based credit-building strategies, and depending on your credit history and financial situation, you may have trouble getting one. If you have an idea of what your credit score is, you can search for credit cards matching your score (you can do this for free on Credit.com), but there are a couple other things you can try, too.
1. Get a Secured Credit Card
It’s easy to get a secured credit card, and unlike debit cards and prepaid cards, a secured card reports your use to credit bureaus and allows you to establish a payment and credit history.
Here’s how they work: You pay a deposit (say, $500), and that becomes your credit limit. You can use the card as you would a regular credit card, spending within your limit and paying the bill. If you miss a payment, the issuer can take your deposit. Many secured cards carry an annual fee, and some allow you to “graduate” to a standard credit card, but you’ll want to explore those possibilities before you sign up for the card.
2. Piggyback on Someone’s Credit Card
If your mom, spouse, brother or someone else has a credit card with a great history, you can consider asking them to add you as an authorized user. It sounds simple — and it is, really — but it’s not the sort of strategy you should choose lightly. This goes for the person you’re asking, too, because by adding you as an authorized user, they’ll be risking their credit for no benefit other than the warm fuzzies they may feel when they decide to help you out. Warm fuzzies and credit card access are not a fair trade.
This isn’t to say you shouldn’t try the authorized user route; rather, you should take the opportunity to practice responsible credit card use and form good habits for when you can get a credit card on your own. Another option is to ask for someone to co-sign your credit card, but similar risks apply in this situation. Again, you’re asking a lot of the other person.
Credit-Building Tips for Credit Card Users
If you already have a credit card, you can consider these few simple strategies that can help you build good credit.
1. Increase Your Credit Limit, Not Your Spending
If you have a solid history of paying your credit card bills, your issuer may grant you a credit limit increase. Often, you have to ask for the increase, and it will most likely result in a hard inquiry on your credit report, but your improved credit utilization rate will eventually outweigh the short-term drop in score (a result of the inquiry).
Here’s the thing: You have to use a smaller percentage of your credit limit in order for this strategy to work. The easiest way to do that is by keeping your spending habits the same as your credit limit rises. If your limit was so low that you have flexibility to increase your spending, you can still improve your credit score — just make sure you’re using a smaller share of your overall credit limit than you were before you got the higher limit.
2. Set Up Automatic Payments
With everything you have going on in your life, it’s easy to forget to pay a bill. Unfortunately, your credit score may not be forgiving if this happens, but if you set your credit card payments to automatically withdraw from your checking or savings account every billing period, you’ll never be late, and you don’t have to remember to pay it.
You still need to stay on top of your payment schedule, because if you lose track and aren’t paying attention to your finances, you may overdraft your bank account, get hit with fees and end up missing the payment anyway.
3. Keep Your Cards Open
Often, your oldest credit card isn’t necessarily your favorite, because as you build credit and qualify for cards with better perks, you have an incentive to use those instead. Still, you don’t want to close that card and eventually lose the benefit of its old age. You can use the card for a small recurring payment (your streaming video service, a magazine subscription, a membership fee), and you’ll keep it active without having to spend too much. Set up an automatic payment for the card so you don’t forget to pay for that small charge.
4. Make Multiple Payments
If you have a credit card you like to use but don’t want to get too close to your credit limit, consider paying the balance several times a cycle. You can pay it after every transaction, if you really want. This way, when the card issuer reports to the credit bureaus, your credit card balance is likely to be much lower than it would if you only paid it once a cycle.
5. Be Patient
If you don’t need a new credit card and you want your score to improve, don’t apply for credit cards. Inquiries have a small impact on your credit score, but applying for credit sparingly will allow you to avoid losing a few points here and there for unnecessary inquiries.
Even though there are a few ways you can try and accelerate the process, it takes time to build credit. Credit cards can be one of the best ways to do so, and if you commit to using them properly, it can be worth the time you spend strategizing. To learn how your credit card use has helped (or hurt) your credit score, you can look at two of your credit scores for free on Credit.com.
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