How to Build Credit with a Credit Card

Credit is the ability to borrow money for things you need now and pay for them later. It’s often necessary when purchasing something expensive, such as a car or house. But to secure credit, you need to build a positive credit score and credit history. That is, you need to prove that you are capable of paying off your debts before someone will entrust you with large amounts of credit. A landlord may check your credit score before allowing you to rent an apartment or other residential property. Other companies that charge you a monthly fee for their services, such as utility and insurance companies, may also check your credit before making an agreement with you. So, what’s the best way to build credit? By using a credit card.

What Is a Credit Card?

A credit card provides you with revolving credit: a type of credit that you can borrow, pay off, and borrow again up to a certain amount of money. Most credit cards have a monthly billing cycle with minimum monthly payments. If you don’t completely pay off the amount you borrowed during one billing cycle, it will carry over to the next and begin accruing interest.

How to Use a Credit Card to Build Credit

Responsible credit card usage can lead to good credit history and make it easier to secure large loans and other forms of credit in the future. So, what does that look like?

Pay your balance in full and on time. This is the most important thing to do if you get a credit card. If you don’t fully pay your balance off each month, your balance will grow and accumulate interest, increasing the amount of money you owe and making it more difficult to pay back. And if you don’t pay it back on time, it will also incur late fees. But if you do pay your balance in full and on time every month, you’re proving to other lenders that you can be trusted with their credit, too.

Don’t borrow too much at once. When you’re approved for a credit card, you’ll receive a credit limit for that card. This is the maximum amount that you can borrow during each billing cycle. But just because you can borrow up to a certain amount, that doesn’t mean you should. Borrowing close to your limit can cause creditors to view you as a high-risk borrower. Therefore, a general rule is to borrow up to 30 percent of the credit available to you. But most importantly, you should never borrow more money than you can afford to pay back by the end of the billing cycle.

Use your card. While borrowing money requires a certain degree of caution, don’t be afraid to use your credit card. An easy, low-risk way to build credit with your card is to only use it for expenses that you are confident you’ll be able to pay off every month. You could, for instance, assign your credit card to your monthly phone and utility bills, or use your card to fill up your car with gas. Limiting your card usage to these smaller expenses is a smart way to gain more experience with credit cards while still building your credit history.

Build Credit with SharePoint CU

Credit can open many doors for you, including the opportunity to buy a car, buy a house, or rent an apartment. And with a credit card, you can start building positive credit now to make it easier to secure those loans in the future. At SharePoint Credit Union, we offer credit cards with exceptional value, convenience, and security. Our cards also provide rewards such as cash back and redeemable points that can be used on travel opportunities and merchandise. To learn more about credit cards and the benefits of applying for a card with SharePoint Credit Union, contact us today.

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