How to Build Credit with Credit Cards

Credit cards, perhaps somewhat ironically, have a notorious reputation for wrecking our credit scores. But, used strategically, those 16 digits can actually be our allies — as long as you know how to build credit with credit cards. 

Let’s take a look at everything it takes to fix or improve your credit score with a credit card, including how credit scores are calculated and, of course, how to use credit cards to build credit scores. We’ll even share some pro tips on selecting a credit card with credit score maximization in mind. 

Not all credit cards are created equal when your goal is credit score repair or growth. But luckily, credit unions and building credit go hand-in-hand. So, while you’re learning more about how to use credit cards to build credit scores, stop by your local credit union to see how it can be the ultimate credit-building partner.

Pros and Cons of Credit Cards

What Are Credit Scores and How Are They Calculated?

It helps to understand what credit scores are in the first place and how credit bureaus compute them. Consider your credit score as a rating of how well you pay your debts. People who pay back loans on time and don’t accrue much debt are much more likely to have a high credit score, while those who default or fail to pay their debts tend to have a low credit score. 

Although each credit bureau follows its own scale, typically, credit scores fall between the range of 300 and 850, with 850 being perfect credit. Thanks to federal law, you can get a free credit report each year from all three major credit bureaus — Equifax, Experian, and TransUnion, through

Usually, you’ll need a credit score of more than 600 to get approved for a card with reasonable rates. 

Credit scores are calculated from data in five fields: 

  1. Payment history/timeliness. Do you make payments on time? 
  2. Current debt. How much money do you owe?
  3. Account history. How long have your accounts been active?
  4. Account quantity. How many credit accounts do you have? 
  5. Credit variety. How many different types of credit have you managed (e.g., credit cards, student loans, vehicle payments, etc.)? 

While credit scores use all these fields, the first two are weighted heaviest. Your payment history makes up 35% of your score, and your current debt makes up 30%. That means these areas influence your final credit score more than the others. 

How to Use Credit Cards to Build Credit Scores Responsibly

As you can see from how credit scores are calculated, the best ways to improve your credit score with a credit card are to make payments on time (or early) and minimize your debt by not overspending. 

In other words, using a credit card responsibly will naturally improve your credit score. 

To improve your credit score fastest, meet the payment deadline every month without missing a single payment in its entirety. However, life happens. If you do miss a payment or need to make the minimum payment, submit the total amount as soon as possible. That way, you can minimize negative consequences like late payment fees or higher interest payments.

Minimizing your debt is a little more complicated. Your credit score considers your "credit utilization ratio," which is how much of your total available credit you are using. The credit utilization ratio is the percentage based on your current debt against your total credit limit. So, if your credit limit is $500 and your existing debt is $100, your credit utilization ratio is 20%. 

Here’s the formula for calculating your credit utilization ratio:

Total revolving balances ÷ total credit limit, then multiply that number by 100 to see your credit utilization as a percentage.

Ideally, experts agree you want to keep your credit utilization ratio under 30%. The lower, the better, especially if you want to improve your credit score quickly. 

If you already have substantial debt, your first goal should be to pay it off as soon as possible. For one thing, the interest rates on your debt will make it harder to pay off the longer it sits. Moreover, having less debt, in general, will raise your credit score, and you want to get your utilization ratio below that magic 30% before you begin making new purchases.

Tips on How to Build Credit with Credit Cards

Credit cards with lower interest rates and higher credit limits will help you improve your credit score more efficiently. Even so, some credit-building practices are more effective than others. The following actions are likely to move the needle in a favorable direction.


Control your purchases 

Start with small, manageable purchases such as groceries or necessities like toilet paper. It's easier to make regular payments when they're affordable.


Increase your credit limit

If you’ve already had your card for a while, you may be eligible to increase your limit. Asking your lender to raise your credit limit is a quick and easy way to lower your credit utilization ratio if the lender approves a higher limit. 


Make small, recurring payments

You don’t want to avoid using your card to improve your credit score. Instead, charge a small, recurring payment that’s easy to pay off, like a monthly subscription or utility bill. This will improve your credit score more than not using your card at all. 


Be patient

Improving your credit score usually takes a few months, at a minimum. However, severe debts will take years to correct. Just be patient and remember to manage both your purchases and payments. Every month you pay on time improves your score. 

How to Choose the Right Credit Card

The type of credit card you choose can also help — or hold back — your efforts to improve your credit score. 

Typically, a secured credit card is the best type of credit card for improving your credit score and building a credit score from scratch. These work much the same as traditional credit cards but with one significant difference: Secured credit cards use an initial deposit as the credit limit. This makes it easy not to overspend. 

The best part of secured credit cards is that they report to credit bureaus like traditional credit cards. That means they affect your credit score just like other credit cards but without the risk of overspending. 

Regardless of what type of credit card you get, be sure to shop around for the lowest interest rate, followed by the highest credit limit that will allow you to improve your credit utilization ratio. 

Common Mistakes to Avoid

Even the best intentions can have negative consequences. For example, the following are some of the most common mistakes people make when trying to use a credit card to raise their credit score.


Applying for too many credit cards at once 

You may think that the more credit cards you use, the faster your credit score will rise. After all, isn’t paying off two monthly payments twice as impressive? 

Sorry, but that’s not how it works. Because the calculation of your credit score considers the number of credit accounts you have, each additional credit card you own can penalize your credit score. 

Instead, stick with one or two cards until you get your credit score to an acceptable range. Having fewer cards will also help you manage your spending, as it reduces the temptation to spread out purchases over multiple cards. 


Not using your card at all 

It may seem logical to improve your credit score by not using your credit card at all. However, while ignoring your credit card may be better than overspending or accruing debt, you will need more than that to raise your credit score. 

Remember that a credit score reflects your ability to pay back debts. It's hard to judge how well you can repay debts if you don't have any debts. That's why it's best to use your card for small, recurring purchases that are easy to pay off. This proves to creditors that you can pay back debts rather than leaving it a mystery.  


Ignoring credit reports

Credit reports aren't perfect. Creditors and credit card companies make mistakes like everyone else, but you don't want to pay the consequences for someone else's error. 

Always double-check your credit reports to make sure everything lines up. If you spot an error or something suspicious that could indicate identity theft, contact your creditor immediately to rectify the problem. 

Further Resources on How to Build Credit With Credit Cards

Want more advice on how to use credit cards to build credit scores? Here are some additional resources that can help:

Credit Unions and Building Credit

Why do credit unions and building credit work so well together? Well, you'll often find credit unions offer better interest rates than other financial institutions, making debts easier to pay off. But that's just one benefit of opening a credit union credit card. Visit your local credit union to find out all the ways its credit card offerings can help you build your credit.

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Did You Know?

Opening a credit card through your local not-for-profit credit union lets you enjoy low-interest rates, personalized member service, and potentially fewer fees than you'll find with a bank-sponsored credit card. That's because for-profit national banks tend to have higher interest rates, less personalized customer support, and are often more likely to charge more significant service fees.

Find the right Credit Union for you

There are more than 5000 credit unions to choose from across the U.S.