How to Use Credit Cards to Build Credit 


By Val Breit - Founder - The Common Cents Club

Last updated 3/3/2020


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Summary: You can do serious damage to your credit score if you don't understand how to use credit cards to build credit. Learn expert tips and strategies to properly build your credit with a credit card.

Using a credit card will have a significant impact on your credit score. There’s no way around it. The key is how you use a credit card that will determine if you improve your credit score or hurt it.

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The steps below show you exactly how to use a credit card to build credit from scratch or to raise a low credit score. When used the right way, credit cards can help you reach your goal of a better credit score.

Some of these tips are so easy they may surprise you, so make sure you read them all.


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How to Use Credit Cards to Build Credit

Here are the keys to building credit with credit cards:

  1. Know your credit score, so you know which cards to apply for
  2. Apply for credit cards
  3. Set up automatic payments from your bank account
  4. Pay your full balance each month
  5. Keep your spending and credit utilization rate low
  6. Pay your balance in full every month by the due date
  7. Become an authorized user on a family member’s card (*optional and use with caution to build credit faster)
  8. Monitor your credit to make sure there are no errors

Let’s dive deeper into each step.

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1. Know Your Credit Score and Which Credit Cards to Apply For

Experian reported the average FICO score in the U.S. was at an all-time high at the end of 2019, with a score of 703. Considered “good credit” by most lenders.

Your credit score is determined by five different categories, which FICO explains are:

  • Payment History (35%)
  • Amounts Owed (30%)
  • Length of Credit History (15%)
  • Credit Mix (10%)
  • New Credit (10%)

Knowing what your credit score is right now will help you set realistic goals for building your credit. Your current credit score will also help you determine which credit cards you should apply for, and which ones you shouldn’t.

If you don’t know your current FICO credit score, the best place to get your annual credit score is AnnualCreditReport.com.

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2. Apply for Credit Cards

The next step is to apply for a credit card that you have good odds of approval for based on your credit score. Although it may be tempting to apply for 20 great cashback cards, travel reward cards, and store credit cards, start by applying to just a few.

If you’re a small business owner or freelancer, you can apply for a business credit card too. You can see why I opted for a simple cashback card in this Chase Ink Business Unlimited credit card review.

Credit Knocks also has an awesome guide to help you determine the best credit cards based on your credit score.

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3. Set Up Automatic Payments From Your Bank Account

After a credit card arrives, set up automatic payments from your bank account, so you always pay your bill on time.

You can even add your credit card due date to your calendar too, so you always remember when that payment is coming out of your account. Paying your credit card bill on time is crucial when you’re trying to build credit.

4. Pay Your Full Balance Every Month

While it’s tempting to only pay the minimum amount due on your credit card, the best way to build credit is to think of your credit card more like a debit card.

This means only spending what you can pay for in full each month.

You can do this by electing to Pay Statement Balance or Pay Current Balance rather than Pay Minimum Amount.

Paying your balance in full is a smart money move because:

  • You build credit faster
  • You save money on interest
  • You’ll be able to achieve your financial goals faster

If you’re having a hard time paying your bill in full, try these unique ways to save money that help me save thousands of dollars per year.

5. Keep Your Credit Utilization Rate Low

Another way to build credit with credit cards is to only use a small percentage of your allowed credit (aim for 25% or less). This is referred to as credit utilization

For example, if you have $10,000 available on your credit card but you only charge $1,000 on it, your credit utilization rate is only 10% because you are only using 10% of your credit limit.

On the other hand, if you max out your credit cards, your credit utilization rate is high because you are using all the credit available to you. This behavior lowers your credit score.

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6. Ask for an Increase on Your Credit Limit

Did you know you can request an increase on your credit limit?

This is an easy way that many people miss to keep your credit utilization rate even lower.

Wait a few months after you get your credit card to show you can use it responsibly, then ask your credit card company to increase your credit limit.

7. Become an Authorized User on a Family Member's Account

Becoming an authorized user on a trusted family member’s credit card is another option for building credit. You should only consider this strategy with someone who uses a credit card responsibly.

For example, if you become an authorized user on your mom’s credit account, you would get a card with your name on it that you would be authorized to make purchases with.

You wouldn’t have all the rights your mom though, because it’s still her account.

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If your mom has a strong history of paying her bills on time and a low credit utilization rate, becoming an authorized user on her account could help you build credit.

Use this strategy with caution because if she misses payments or has a high credit utilization rate, your credit score could drop.

8. Monitor Your Credit

Finally, make sure you keep a watchful eye on your credit to make sure your score is accurate.

Monitor your credit regularly to see that:

  1. New credit cards are added to your account (this could take up to 30 days)
  2. Information is accurate (mistakes happen, and it’s up to you to watch for them)
  3. Fraudulent actions (like a new credit card or loan that you didn’t open)

If you see any credit card errors, be sure to dispute them right away.

Quick Tip:

When dealing with a Secured Credit Card you get to choose your own credit limit, you should start with a good amount.

Rinse, Repeat, And Watch Your Credit Score Grow

Building credit takes time, but the benefits of good credit are worth it. Stick to these steps and within 3-6 months, you should see your credit build and score start to rise.

Once you get the hang of how to establish good credit, you can repeat these steps and continue to build better credit year after year.

Val Breit and her husband paid off over $60,000 in debt and lived off one teacher’s income, so she could live her dream and become a work-at-home mom. She started The Common Cents Club, a site for honest reviews and money tips to show you how to invest in the things that really matter, so you stop settling, crush your goals, and create your dream lifestyle.

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