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How to Use a Credit Card to Build Credit

Credit cards can help or hurt your credit — it's all in how you use them.

Justin Cupler

Contributing Writer at Tally

June 1, 2021

Credit cards often bear the brunt of the blame when it comes to debt in the U.S., but they aren't all bad. In fact, credit cards can go a long way in helping you to build credit if you have none or rebuild credit if you've had financial issues in the past. 

We'll cover how to build credit with a credit card below. But we'll also touch on some of the other ways you can improve your credit score. Combining these tactics may help you reach your credit score goals faster.

How to Build Credit

Part of improving personal finances is building your FICO credit score. A credit score is the numerical translation of your credit history that gives lenders a quick look at your overall financial wellness.

Your FICO score isn't the single determining factor in getting approved for loans, credit cards, and other credit, but it is a barometer of your approval odds.

Whether you had some credit issues in the past or are just getting started with credit and have no credit score, there are certain steps you can take to build your credit

  • Become an authorized user on a friend’s or a family member's credit card account

  • Add a co-signer to get approval for a loan or credit card

  • Apply for a credit-builder loan

  • Develop healthy debt-management habits 

While those will all help, one of the quickest routes to building good credit is using a credit card. 

How to Build Credit with a Credit Card

Building credit with a credit card isn't overly challenging, but it requires a fair amount of research to find the right card for you and careful financial management. Here's a step-by-step breakdown of building credit using a credit card. 

1. Finding the right credit card for you

Start by laying out your wants from a credit card. Are you an avid traveler? Airline points or cash back may be what you target. Are you planning a large purchase and want favorable financing? A credit card offering a low- or no-interest intro promotion is a good option. 

Whatever your wants are, shortlist two or three credit cards that fit your needs and apply for them. Don't apply for too many credit cards at once, though. Too many credit card applications will result in multiple hard inquiries on your credit report, which can lower your credit score.

If you get approved for one of your preferred cards, great. You can skip ahead to step two. 

Since you're building or rebuilding credit, there is a chance your bad credit or lack of credit is too much of a risk for traditional credit card issuers. With bad credit, you've shown recent issues managing your finances. With no credit at all, the credit card company has no history to determine if you'll repay what you owe.  

Fortunately, there are plenty of credit-building and credit-rebuilding cards that are more likely to approve people who don’t qualify for a traditional credit card. Keep in mind that these cards often have high interest rates, high annual fees, and low available credit limits. They also often lack the perks you expect from traditional credit cards, like reward points. 

There are also secured credit cards, which will approve nearly anyone because you must pay a security deposit that matches your credit limit. So, if you want a $300 credit limit, you send the credit card company $300, and it will send you a credit card with that limit. If you default on your payments, the credit card company will use that security deposit to pay off your balance. 

Despite funding your own credit limit, these secured credit cards report to at least one of the three major credit bureaus: Experian, TransUnion, or Equifax. Ideally, you'll find one that reports to all three. You can often find out which bureaus they report to on the credit card company's FAQ page online or by calling customer service. 

2. Using your credit card to pay for normal expenses

To build credit, you must use credit. Use that new credit card to pay some monthly expenses, like groceries, utility bills, car insurance bills, and more. Make sure it's a relatively consistent monthly expense that's already in your budget

You may want to save the cash you'd usually use to pay these expenses in a separate bank account. This could keep you from accidentally spending it. 

When paying expenses, keep your credit card balance low — ideally below 30% of your credit limit. This figure is your credit utilization ratio, and it makes up 30% of your FICO score

3. Paying the bill in full every month

When you get your monthly bill in the mail, pay the statement balance in full by the due date. This will ensure you pay within the interest grace period so you don’t incur interest charges. If you're mailing in your monthly payment, send it about a week before the due date to make sure it gets to the credit card company and processed in time so you don't get a late payment fee. 

If your credit card offers automated payments, you may want to consider enrolling in them. This will pay your credit card on time every month and help avoid late fees — as long as you have the cash in the bank to cover the autopay. 

4. Monitoring your credit report and score

As you continue using your credit card and paying off its balance, monitor your credit report and credit score to ensure your on-time payments show up and your score is rising. If your on-time payments aren't recording, contact the credit card company to see if there is a reporting error. 

Keep in mind that building your credit score is a relatively lengthy process that comes with its ups and downs. One month, you may see your credit score jump 20 points, but the next month, it could drop 15 points. The goal is consistent net growth over the long haul, not the monthly ups and downs. 

You can monitor your credit report for free from a wide range of websites. A quick online search for "free credit score" will turn up many results. Some credit cards also offer credit monitoring as a perk for using their card. These free scores are often estimates, but they will give you a good indication of whether or not you're on the right track.

You're also legally entitled to one free yearly credit report from all three credit bureaus at This will not include your credit score, but it will confirm whether or not your on-time payments are showing. 

As a third option, you can pay one of the three major credit bureaus for a full credit report and score. These are generally part of a monthly subscription and will give you the most accurate look at your credit score and report. 

5. Converting your secured credit card

If you got approved for a traditional credit card in step one, you can skip to step six. 

Depending on the credit card company you're working with, you may be able to exchange your secured credit card for a more traditional unsecured credit card after a while. Not every secured credit card issuer offers secured cards, and they will all have different requirements for switching. 

Some may require six months of being in good standing to convert, and others could be a year or longer. You can generally find this information in your terms and conditions, but you can also contact customer service for additional details. 

Ideally, the company will allow you to convert the card, eliminating the higher fees and other downsides to these credit cards. 

Converting the existing credit card account will also keep the same account on your credit report. This can help with your length of credit history, which accounts for 15% of your FICO credit score.

The length of credit history looks favorably upon older, active credit card accounts and can penalize you for closing these accounts or opening new accounts. Converting your secured account to an unsecured account can avoid this issue altogether. 

If your secured credit card issuer doesn't offer unsecured cards or it can't simply convert your secured card to unsecured, it's time to start looking for new cards. Return to the shortlist you made initially, update it as needed to account for any changes in your life, and reapply to the two or three best credit cards. 

When applying for these unsecured credit cards, you’ll usually need at least a good credit score, which is a score of 670-739. Before you apply, verify your credit score meets this minimum. If it doesn't, continue on your credit-building path until it does. 

6. Continuing on your path to excellent credit

After converting your secured credit card or getting a new credit card, you can continue the process of charging your living expenses and paying off the credit card every month. This may help you continue to build credit and potentially reach the excellent credit tier

Credit Cards Can Be a Pathway to Good Credit

Credit cards don't always have the best rap, as they generally catch much of the blame for Americans who struggle with debt problems. However, credit cards can play an instrumental role in building and rebuilding your credit when used responsibly. 

You can do so by:

  • Finding the right credit card for your lifestyle

  • Using your new credit card to pay for typical monthly expenses

  • Paying off the credit card in full every month

  • Monitoring your credit score and report

  • Converting your secured card to an unsecured card or getting a new unsecured credit card

  • Continuing on the path

That’s six quick and easy steps to using a credit card to build your credit score. There are other ways to build credit, like becoming an authorized user or taking out a credit builder loan. If you combine these tactics with this credit card technique, you may reach your credit score goals sooner. 

If you're struggling with credit card debt already, the Tally line of credit1 can help. It offers an interest rate that's typically lower than most credit cards, allowing you to pay off your credit cards quicker and with fewer interest charges. The Tally line of credit also offers customizable payment plans. Also, the app will manage all your credit card payments so you can avoid late payments.

1To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) Will be between 7.9% - 25.9% per year, and will be based on your credit history. The APR will vary with the market based on the Prime Rate.