How To Use Your Credit Card To Build Credit

How To Use Your Credit Card To Build Credit 

Since credit cards make up about 15% of your credit report, they can be a valuable tool for building or improving your credit! 

However, in order to build credit with your credit cards, you must use them responsibly. Keep these few strategies in mind when using your credit card.  

Open a credit card or become an authorized user on someone else’s 

Getting approved for a credit card may be difficult if you have never had credit before, or if you have poor credit. However, consider these two options: 

Secured credit cards are a great way to start building credit on your own. With a secured credit card, you send the card issuer a refundable security deposit when you open your account. Although secured cards may have high fees and don’t necessarily offer the best cardholder benefits, responsible use can lead you to qualify for better credit cards in the future. 

Student credit cards can also be a good option if you’re a student. Although the cards tend to have low credit limits, they typically have few fees and can even offer rewards on purchases. 

Or, you can ask a friend or family member to add you as an authorized user on one of their credit cards. If they do, their credit card will be added to your credit report. You will have your own card and be able to make purchases as long as the primary cardholder agrees. In order to build credit, you need to make sure that both you and the primary cardholder are using the card responsibly.

At Southland, we are offering our Smart Card with two distinct options for you. Our standard Smart card is perfect for students or those who have just entered the workforce and are looking to establish and build a credit history. The Smart Card also has a secured option for those who want to repair their credit. The Smart Card includes no annual fee and Visa Zero Liability coverage

Pay your bill on time 

Payment history is the most important factor that determines your credit score. In order to build your credit, you must make at least your minimum payment on time every month. If your credit card payment is 30 days past due, your credit issuer can report it to the credit bureaus. Then, it can become a negative mark on your credit for up to seven years. 

Spend beneath your credit limit 

Your credit card’s balance relative to its credit limit is considered low utilization. In addition to your payment history, low utilization is also an important factor for your credit score. It can be achieved by keeping your credit card balance low. 

If you have a low credit limit, you can keep a low utilization by limiting your card use. Aim to keep it below 10% for the best credit scores. 

Don’t apply for more credit too soon 

Every time you apply for a new credit card or loan, credit inquiries show up on your credit report. If you have too many inquiries in a short period of time, you may appear as high risk to lenders. 

This can cause you to receive a less-than-ideal interest rate or to have your application denied completely. If you’re new to establishing credit, it’s best practice to space out your credit applications by at least six months. 

Click here to check out Southland's credit-building card options!  

For more resources on how to improve your credit, view Southland's page here.

Research from Experian and Business Insider.