Building credit might sound as fun as watching paint dry, but it’s one of those necessary evils like flossing or pretending to enjoy small talk. Lucky for you, learning how to build credit with a credit card can be a game-changer in this uphill battle. If you’re ready to tackle the credit game with the panache of a financial maverick, read on.
MoneyLion can help you explore various credit card options tailored to different needs and preferences. Whether you’re just starting or looking to fine-tune your credit strategy, MoneyLion has your back.
Ways to build credit with a credit card
So, you’re ready to dive into the world of credit building with a credit card. Smart move. Let’s break down the best strategies to help you make that plastic work in your favor. Here’s how you can turn your credit card into a powerful tool for boosting your credit score.
Consider a secured credit card
Think of a secured credit card as training wheels for your credit journey. You plunk down a cash deposit, which becomes your credit limit. It’s like a safety net, making it a great option if you start from scratch or rebuild after a financial faux pas. Make timely payments, and your credit score will reflect your responsible behavior before you know it.
Become an authorized user
This is like catching a ride on someone else’s good credit coattails. When a family member or friend adds you as an authorized user on their credit card, their credit habits can boost your score. Ensure they’re financially responsible, or you could go down with their ship.
Open a student credit card
For the budding scholars, student credit cards are tailored to those with little to no credit history. They come with perks like lower interest rates and rewards for responsible use. Just don’t max it out on ramen noodles and Red Bull.
Best practices when using a credit card to build credit
Building credit with a credit card requires careful habits and smart strategies to make sure your score moves in the right direction.
Use a credit monitoring service
A credit monitoring service keeps tabs on your credit activity, offering alerts for changes like new accounts, hard inquiries, or suspicious activity. This proactive approach is essential for building credit because it helps you identify and address errors or fraud that could harm your score. Many credit monitoring services provide personalized tips to improve your credit and track your progress over time, making them a valuable tool for anyone serious about building and maintaining good credit.
Pro tip! Building your credit starts with knowing and understanding your score, creating goals, and then monitoring your credit as you take steps to build it. Services like those offered by MoneyLion can help keep you on track by alerting you to changes and offering improvement tips.
Pay off the entire balance each month
Paying off your credit card balance in full is the financial equivalent of eating your veggies. It keeps your credit healthy and avoids the dreaded interest fees. If you can’t pay the whole amount, aim to pay more than the minimum to show you’re serious about managing your debt.
Keep your utilization in check
Credit utilization is the percentage of your credit limit you’re using. Aim to keep it below 30%, but the lower, the better. This shows lenders you’re not overly reliant on credit, making you look like a financial rock star.
Use only the credit cards you need
Avoid the temptation to open multiple credit cards. It’s like juggling; the more you have, the harder it is to keep up. Stick to one or two and use them wisely to build a solid credit history without the risk of getting in over your head.
How long does it take to build credit?
Building credit isn’t an overnight miracle; it’s a marathon. Typically, it can take three to six months of consistent, responsible credit card use to see a noticeable improvement in your credit score. The key is patience and persistence. Keep paying on time, managing your utilization, and monitoring your progress. Rome wasn’t built in a day, nor is your credit score.
Alternative ways to build credit
Not a fan of credit cards? No problem. There are other avenues to boost your creditworthiness.
Apply for a credit builder loan
Credit builder loans are specifically designed to help you build credit. You borrow a small amount, and the lender holds the funds in a savings account. As you make monthly payments, these are reported to the credit bureaus, helping to boost your score. Once the loan is paid off, you get access to the funds.
MoneyLion offers a free and convenient way to find offers from our trusted partners to help you improve your credit — such as credit monitoring, credit report disputes, and getting credit by paying bills. A good credit score can lead to lower interest rates and increased borrowing power on loans and credit cards.
Reporting rent or utility bills
Your monthly rent and utility payments can also contribute to your credit score. Services exist that report these payments to credit bureaus, which can be a game-changer if you’re consistent and on time with your payments.
Take out a personal loan
Personal loans can also help build credit, provided you manage them well. Regular, on-time payments will reflect positively on your credit report. However, be mindful of interest rates and only borrow what you can comfortably repay.
MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.
Your credit journey awaits
Building credit with a credit card doesn’t have to be a herculean task. Whether you opt for a secured card, become an authorized user, or choose a student credit card, the key is to use it responsibly. Remember to monitor your credit, pay off balances, and keep your utilization low. If credit cards aren’t your jam, consider alternative methods like credit builder loans or reporting rent payments.
FAQ
Can I build my credit score with any credit card?
Yes, you can build your credit score with any credit card, provided it reports to the credit bureaus. The key is to use the card responsibly, make timely payments, and keep your utilization low.
How do you build your credit fast with a credit card?
To build your credit quickly with a credit card, focus on making all payments on time, paying your balance in full each month, and keeping your credit utilization below 30%.
Do I have to use my credit card every month to build credit?
While regular use of your credit card can help build credit, using it every month is unnecessary. What’s important is that you manage it responsibly and make timely payments when you use it.
