How to Use a Credit Card to Build Credit

  • by Johns Hopkins FCU
  • 5/6/22
Woman sitting at a table, in a building facing a city view. Coffee sitting on table. She is typing her credit card number into her laptop for a purchase

If you’re wondering how to use a credit card to build credit, it’s easier than it seems. Using your credit card wisely makes a big difference in your overall credit score. Getting a credit card and using it regularly and responsibly is one of the fastest and most effective ways to build your credit. 

Below we share a list of best practices to help you use your credit card to build credit and the two best cards we offer to fit the task!

Which Credit Card Will Help Build My Credit? 

If you currently do not have a credit score, our Visa Starter Card is a great way to begin establishing a strong credit score. This could also be a great fit for you if you’re looking to improve your current credit history with a maximum (and manageable) credit limit of $500.

If you’re in a similar situation of needing to build or rebuild credit but need a higher limit, choose our Secured Visa Credit Card. Our secured credit cards are backed by a security deposit equal to the credit limit you are applying for between $500 and $5,000. We recommend funds come from cash, direct deposit, your tax refund, or a certified check.

Pay More than the Minimum Payment

Minimum monthly repayments tend to be set at very low levels. These are sometimes as low as 1% plus any fees, interest, and charges but most will be higher. If you only make the minimum payment, your debt could take years to pay off and you could pay significantly more than you need to in interest.

Paying off your credit card balance in full and on time each month reports great payment history to the credit bureaus. Get in the habit of using this as a best practice — your payment history has a big impact on your credit score. However, if you've never had to make these payments, you’ll need to build up your history in order to even establish a score.

Keep a Low Balance

Keeping your credit card balance relatively low can provide a significant boost to your credit whether you’ve just started or you’re rebuilding with better habits. 

When using your credit card, be mindful of your credit utilization which is the amount you owe as a percentage of your available credit. Aim to use your credit card regularly but keep utilization low. This ensures you won’t be overextended and risk the possibility of missing payments. 

When you're swiping a card rather than handing over cash, it can be easy to lose track of how much you've spent. Get in the habit of checking your transaction history once or twice a week to make sure you're not creeping too close to your credit limit.

Become an Authorized User

If you decide against getting your own card at this time, try to establish credit by becoming an authorized user on someone else’s account. An authorized user is an extension of the primary cardholder but isn't responsible for paying the bill or undergoing a credit check. 

You’ll receive a card connected to the cardholder’s account and can make purchases on behalf of their credit limit. Being an authorized user won’t help you build credit as quickly as with your own card, but is still worthwhile. 

Remember, your credit report and history are reflective of that credit card's payment and utilization history so be sure to choose someone who is financially responsible.

Know Your Credit Report

Another part of using your credit card to build credit is beyond the card! Inspect your credit report for errors and know your score. Your credit report outlines your credit activity, your credit history, and the status of your credit accounts. 

JHFCU offers a credit score monitoring service, where you can monitor you credit, and get updated information on your credit score. Even better you can access this tool through online and mobile banking.

It’s important to check your credit report every year for unusual activity and dispute errors as you build your credit. An error or identity theft that has gone unnoticed can ruin the credit history you’ve worked to build.

For more information on how to obtain a credit report from the three nationwide consumer credit reporting companies - Equifax, Experian and TransUnion, read more here.

Avoid Having Too Many Cards

We mentioned two of the best credit card options to start your credit card search, but you might wonder about accounts you already have open.

When you close a credit card account, you instantly reduce the amount of credit available to you. This can negatively impact your credit score because it will likely increase your credit utilization rate. For this reason, keep credit card accounts open, even ones you haven't used in a while. 

If you’re trying to rebuild credit and think you have too many cards or ones no longer in use, avoid closing accounts without first considering the impact on your credit score. It's better to leave your credit card accounts open and make very small purchases to prevent the account from being closed. 

Knowing When to Use Debit or Credit  

Both credit and debit cards make it easy and convenient to make purchases in stores or online. The convenience and protection they offer are hard to beat, but they have important differences that could affect your spending. 

Read below to decide which one to use to best meet your spending needs.

Credit Cards vs. Debit Cards: When You Should Use Each of Them