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How to Build Credit with a Credit Card in 2022?

Janine DeVault

Jul 18, 2022 7 min read

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How to Build Credit with a Credit Card in 2022?

Credit cards are one of the most popular ways to begin building credit in 2022. As long as you make your payments on time and maintain a favorable credit utilization ratio, you will be well on your way to establishing a solid credit score. 

If you’ve never had a credit card before, it’s important that you understand how to use your card responsibly. To avoid potential pitfalls, always be mindful of your credit limit, interest rate, and the fees associated with using your credit card. In other words, read your credit card contract carefully before you start spending. 

You might be thinking, But don’t I need good credit to qualify for a credit card? Not necessarily! There are credit cards that are specifically designed for customers with poor or non-existent credit history to get started building credit.

Read on for everything you need to know about using a credit card to build credit! 

Credit Card Issuer

Become an Authorized User

One of the fastest ways to build credit with a credit card is by becoming an authorized user on another person’s credit card account. When the primary account holder adds you as an authorized user, you will be issued a credit card in your name. The credit data from the account will be reported to the credit bureaus and tied to your credit report, enabling you to piggyback off the primary account holder’s positive credit history. 

Having an account on your credit report that has been open for several years and is always paid on time offers a powerful boost when you’re beginning to build your credit score. Many parents use this strategy to help their kids start building credit, but anyone with an account in good standing can do this. If you’re keen to start building credit, ask your parents or a close friend if this is possible. 

If you’re nervous about incorporating a credit card into your finances, becoming an authorized user is a great workaround. You don’t even need to use the credit card to benefit from having the account associated with your credit profile. Account-holders sometimes won’t even provide authorized users with their own card, so you don’t have to worry about overspending. 

Become An Authorized User

Get a Secured Card

Secured credit cards are a fantastic way to begin building credit before you can qualify for a standard, unsecured credit card. Secured credit cards are so-named because they are backed by your own money. When you open one of these cards, you will put down a cash deposit (usually around $500), which will serve as your credit limit. 

If you don’t have anyone willing or able to add you as an authorized user on their credit card account, a secure credit card is a strong alternative. You just need to save up some cash for the deposit. 

When you use your secured credit card, you’re essentially borrowing against your own money. Even though the account is backed by your own cash, you are still required to pay your bill on time each month. The credit card company will report your account status to the credit bureaus each month, enabling you to build credit over time. Unfortunately, secured credit cards often have high interest rates, so avoid carrying a balance on your card. 

After managing your account responsibly for a year or two, your credit score will likely be strong enough to qualify for an unsecured card! When you transition to an unsecured account, the credit card company will return the cash deposit you made to open the account. 

Person's Card

Get a Student Card

Student credit cards are a popular way for college-aged individuals to start building credit. These cards typically have low limits (usually $500 to $1000) and are aimed at recent grads with limited credit history and low income. As such, getting approved for these credit cards is fairly easy.

Because they are aimed at individuals with no credit history, student credit cards represent a larger risk for credit card companies. They compensate for this risk by placing higher interest rates on these cards. If you apply for a student credit card, be mindful of the interest rate and make an effort to pay your account in full each month. 

Paying your student credit card on time each month will help you build positive credit history. Eventually, you’ll be able to upgrade your account to a card with a higher credit limit and a more favorable interest rate. 

Make On-Time Payments

Making on-time payments is one of the easiest ways to improve your credit score when you first start building credit (and missing a payment is one of the quickest ways to damage it). On-time payments make up 35% of your overall credit score, and if you plan carefully, they’re a quick win.

Do whatever you can to ensure you don’t miss a payment. Monitor your spending to ensure you always have sufficient cash to cover your minimum payment. Set a payment reminder (or two) on your smartphone for your bill’s due date, or better yet, set up an automatic transfer from your checking account to your credit card. Download your credit card company’s mobile app to make payments quickly and easily. 

Missed Payment

Avoid Maxing Out Your Credit Card

Maxing out your credit card can be detrimental to your credit score in several ways. If you run your balance up too high, you might find it tough to keep up with your minimum payments, and this could lead to late payments, which are detrimental to your credit score. Additionally, if your credit card has a high interest rate, your payments could quickly become unmanageable, causing undue financial strain and resulting in missed payments which will also hurt your score.

Don’t forget that credit utilization makes up 30% of your overall credit score. As such, carrying a high balance on your credit card will be detrimental to your credit score. The standard rule of thumb is never to spend more than 30% of the credit that is available to you. If you want to increase your score quickly, try paying down your balance! Maintaining a balance at or below 30% will benefit your score and increase your chances of being approved for new credit products in the future. 

Make Purchases You Can Afford

Credit cards are a very handy financial tool because they offer spending flexibility and make it easier to finance large purchases. However, avoiding the temptation to live beyond your means is essential. 

Becoming over-reliant on your credit card could lead to carrying high balances, skyrocketing your minimum monthly payments, and making it challenging to make payments on time. Not only is this detrimental to your credit score, but it’s a stressful way to live. 

Establish a monthly budget and never spend more than you can reasonably afford. It’s wise to reserve some spending room on your credit card in case of an emergency. Whether you need to pay for maintenance on your vehicle, unexpected dental work, or groceries, you’ll be glad to have a bit of a buffer. 

Secured Cards

Avoid Paying the Minimum

Paying the minimum amount required on your credit card each month will keep your account current and in good standing, but it’s better to pay more than that. Any balance you carry forward from one billing cycle to the next will be subject to interest. Assuming you have a secured or a student credit card, your interest rates will be very high. This means you’ll be paying a significant portion of interest in addition to the balance that you owe.

Sometimes money is tight, and paying only the minimum is unavoidable, but if possible, make an effort to pay more than the minimum amount each month. Not only will this maintain a favorable credit utilization ratio and payment history, but it will help you pay your debt off faster and save you a lot of money on interest along the way.   

The Bottom Line

Credit cards are a fantastic way to build your credit score when used responsibly. Not only are they one of the most accessible credit products to obtain, but they are also convenient and offer a financial cushion in the case of emergencies. Even if you only use your credit card sparingly, having an account in good standing will help you develop a positive payment history and open the door for future credit products. 

Janine DeVault
Janine DeVault

Janine is a writer who focuses on topics such as credit education, money management, and renting best practices for tenants and landlords. Janine loves to travel and has lived in Canada, the US, and Mexico.

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