Financial Education

Find out how to use a credit card to build credit

Credit cards are one of the easiest ways to build and rebuild your credit history! In this article, you’ll learn how to use your credit card in your favor! Keep reading to learn more!

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A credit card is a great way to start building good credit

Good credit score for credit card spending with sufficient cash
Find out how to use a credit card to build credit! Source: Adobe Stock

A credit card can be a powerful tool when used correctly. And if you’re wondering how to use it to build credit, then you’re in the right place.

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This article will give you the best tips for working your credit with your credit card.

With a solid credit history, you’ll be able to qualify for all types of financing with better terms. Keep reading to learn how!

How long does it take to improve your credit score with a credit card?

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Find out how long it takes to build credit with your credit card! Source: Adobe Stock

Credit scores are the most important number in our financial lives.

This three-digit number ranges from 300 to 850 and can determine your creditworthiness and how likely you are to pay the debt.

As a result, lenders will consider it a decisive factor in letting you borrow money.

Also, a higher credit score can give you access to better terms and rates regarding mortgages and loans, for example.

Five factors have a major influence on a credit score: payment history, credit usage, length of credit history, types of accounts, and recent activity.

Therefore, if you work on those factors, you can get more points on your score. Credit cards are one of the most effective ways to improve your score.

Card companies usually send updates to the major credit bureaus every month after the end of your billing cycle.

So you will start seeing some differences in your credit after your payments are reported.

If you use your credit card responsibly, your credit score might increase in a few days, weeks, or months.

Consequently, it will depend on when your payment history is reported to Equifax, Experian, and TransUnion.

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Learn how to use a credit card to build credit

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Keep reading for the best tips on how to use a credit card to build credit! Source: Adobe Stock

Credit cards can make a positive and negative impact on your credit history! It will depend on how you use it and how responsible you are.

If you want to work your way toward a stronger credit score, there are a few golden tips that will help you! So here are the best ways to work on your credit using your credit card.

Make your payments on time

This is the most basic tip but is also one of the most effective since your payment history is a major factor in your credit score.

Remember to make at least the minimum payment on time monthly.

If you miss the due date, the credit card issuer will charge you a fee for late payment and report it to credit bureaus 30 days past the due date.

To help you stay on top of your bills, you can set up autopay on your credit card account. You can use autopay to set up a minimum payment and pay the remaining balance separately.

So if you want to avoid any negative late payment reports, make sure to pay your credit card bills on time.

Keep a low credit utilization rate

Another factor that can be highly influential on your credit score is your credit utilization. It is a measure that combines your credit card balances compared to your total credit available.

Keeping a lower utilization is considered better for your credit score. You can do that by limiting your credit card use.

Remember that there is no perfect credit utilization rate. However, you can always try to keep it at 10% to achieve a better credit score.

Become an authorized user

You can also increase your credit score by becoming an authorized user on someone else’s credit card account.

For example, if you have a relative with good credit as a primary cardholder, they can add you as an authorized user. This way, you can make purchases with their card.

The primary cardholder will be responsible for making the monthly payments, but using this credit card will help boost your credit score.

On the other hand, if the primary cardholder doesn’t pay his bills on time, it could negatively affect your score. So make sure you only use this resource with a reliable person.

Consider applying for secured credit cards

Secured credit cards are a good option for people with bad credit. It requires a refundable security deposit for new applicants, which often can be used as a credit limit.

Secured credit cards will report your monthly payments to the major credit bureaus. And if you keep your account open long enough, it can help you increase your length of credit history.

Once you achieve a higher credit, you can apply for a regular credit card with better benefits.

Bottom line

As previously said, credit cards can be of great help when it comes to boosting your credit score. If you use it well, you can get the result in as little as weeks.

You can do several things to speed up the process, and using your credit card is one of them. So make sure to use your credit card responsibly to stay out of debt.

We have the perfect article to help you even more in your credit-building journey. Keep reading to learn more tips on how to boost your credit score fast!

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About the author  /  Beatriz Vieira

Beatriz Vieira is a producer and copywriter who is part of the finance writer team in this portal. She has a degree in Journalism and aims to improve her bilingual writing skills. Her subjects of most significant interest are culture, finances, and self-development.

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