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Best Credit Cards For Building Strong Credit In 2024

Ready to build a robust credit history but not sure where to start? Well, you’re not alone. Many people grapple with the same question every day. The answer might be right in your wallet – a credit card. Yes, when used wisely, it can be a powerful tool to build and improve your credit score.

But with so many options available, how do you choose the right one? That’s where I come in. I’ll guide you through the maze of credit cards, highlighting the best ones for building credit. So, buckle up and let’s embark on this journey to financial empowerment together.

Understanding Credit Building

Understanding Credit Building

Building credit might seem like a daunting process, but, with the right tools and mindset, it becomes a manageable and rewarding task. Credit cards, when used responsibly, serve as one of the most efficient tools for credit building.

How Credit Cards Impact Your Score?

Credit cards play a significant role in determining your credit score. This score, calculated by entities such as Experian, TransUnion, and Equifax, relies on several factors. Key among these are your payment history, amount owed, length of credit history, types of credit used, and new credit applications.

To illustrate, let’s say you make your credit card payments on time, always. This consistency positively contributes to your payment history, which forms about 35% of your credit score. Likewise, if you keep your balance low relative to your credit limit, it reflects positively on your credit utilization, which accounts for 30% of your score. In short, maintaining a low balance and timely payments facilitate good credit health.

What to Look for in a Credit Building Card?

When selecting a credit card to build your score, you’d want one featuring favorable terms. Here’s three key attributes to consider:

  1. Low APR: APR (Annual Percentage Rate) refers to the cost you incur for borrowing. Lower APRs mean less interest, keeping your debt manageable.
  2. Flexible credit limits: Some cards offer an increase in your credit limit after a number of on-time payments. This feature aids in maintaining lower credit utilization ratios.
  3. Reporting to credit bureaus: Ensure the card issuer reports to the major credit bureaus. This is crucial since maintaining a good payment record is moot if it is not being reported to the bureaus calculating your credit score.

Hence, navigating your way through the credit card maze becomes less intimidating when you know what to look out for.

Read More : What-is-a-bad-credit-score

Top Credit Cards for Building Credit

Top Credit Cards for Building Credit

Laying a solid credit foundation requires the right tools. Here are my go-to credit cards for fostering a sturdy credit history. Remember, a card’s effectiveness depends primarily on responsible use, irrespective of the type.

Secured Credit Cards

Secured credit cards serve as an excellent starting point, regardless of your credit history – or lack thereof. These cards mirror typical credit cards but necessitate a security deposit. This deposit effectively controls the card’s credit limit.

One example of a stellar secured card is the Discover it® Secured Credit Card. Its most prominent feature, cash back on every purchase, stands out. Coupled with no annual fee and the automatic review of your account after eight months for a potential upgrade to an unsecured card, it’s an ideal choice for beginners.

Another notable option is the Capital One® Secured Mastercard®. Apart from its credit-building potential, this card offers benefits such as payment flexibility and wide acceptance globally.

Student Credit Cards

Financial independence commences in college for many. Student credit cards, tailored to meet cash-strapped students’ needs, lead the charge. Their perks include lower interest rates and rewards on routine expenses.

Consider the Journey® Student Rewards from Capital One®. Aside from building credit, holders earn cash back on all purchases, with a bonus for paying on time – a practice that also helps boost your credit score.

In the same vein, the Discover it® Student Cash Back card, with its high cash back rates on rotating categories, offers an educational platform to learn responsible card usage while reaping rewards.

Retail Credit Cards

Retail credit cards, offered by numerous stores, could also serve as a step ladder for your credit-building journey. Their high-interest rates may be a deterrent, but the easily obtained approval makes them worth considering.

One such card is the Amazon.com Store Card. A cardholder’s benefit includes a 5% cashback on Amazon.com purchases for Amazon Prime members. Another is the Target RedCard™. Offering a 5% discount on Target purchases, this card is a must-have for frequent visitors of the retailer.

In closing, each card type presents a unique path to building strong credit, and the key lies in identifying the one aligning with your fiscal habits and objectives. Always remember, responsible use – timely payments and low credit utilization – remains key to credit health and growth.

Read More : When-does-capital-one-report

Features That Enhance Credit Building

Features That Enhance Credit Building

Knowing well the significant role credit cards play, it’s critical to know, in detail, features enhancing credit building. These features not only assist with establishing a strong credit background but also guide users on optimal card usage. Two of the most important features to consider are Reporting to Credit Bureaus and Credit Limit Increases.

Reporting to Credit Bureaus

Reporting to credit bureaus stands out as an influential feature in credit-building. Credit cards, such as Discover it® Secured Credit Card and Capital One® Secured Mastercard®, not only report your payments but also your credit utilization to credit bureaus. Regular reporting allows bureaus like Experian, Transunion and Equifax to keep current records of your credit behavior. A regular pattern of responsible credit card use then reflects positively on your credit score. Progress, therefore, lies in consistently up-to-date and responsible card usage.

Credit Limit Increases

Credit limit increases serve as another important feature. Cards like Journey® Student Rewards from Capital One® and Discover it® Student Cash Back offer a higher credit limit over time, which, when used responsibly, can reduce your credit utilization ratio — a key factor affecting credit scores. I cannot overemphasize the benefits of growing credit limits while maintaining controlled spending, as this demonstrates reliability and creditworthiness. The lesson here? Increased credit limits don’t mean increased spending. It’s about capacity to borrow, not stretching that capacity to its limit.

Read More : Prosper-credit-card

Managing Your Credit Card Responsibly

Managing Your Credit Card Responsibly

Helping you achieve a good credit score, responsible management of your credit card remains crucial. The following practices ensure your credit history paints a picture of financial responsibility and stability.

Making Payments on Time

Paying on time matters, marking a crucial factor that influences your dispute credit report. The importance of paying before the due date can’t be overstated. For instance, credit cards like Discover it® Secured Credit Card and Capital One® Secured Mastercard® record your payment history, displaying your financial discipline to credit bureaus. Consistently late payments could tarnish your reputation. To avoid this pitfall, setting up automatic payments can prove to be a lifesaver, ensuring that you never miss a payment deadline.

Keeping Balances Low

Aim to keep your balance low, emphasizing your responsible lending behavior. The utilization rate is a term you might come across, referring to the proportion of your total credit limit that you’re using. Credit utilization rates carry significant weight in your overall credit score calculations. Cards such as Journey® Student Rewards from Capital One® offer flexible credit limits, but it’s beneficial to maintain a utilization rate of 30% or less. For instance, if your limit is $1,000, try to keep your balance below $300. Ensuring low credit utilization demonstrates your ability to effectively manage the credit available to you, further boosting your credit score.

Conclusion

So there you have it. Building credit isn’t a mystery, it’s a disciplined practice. And the right credit card can be your best tool. Whether it’s the Discover it® Secured Credit Card for its reporting features, the Capital One® Secured Mastercard® for its reliability, or the Journey® Student Rewards from Capital One® for its flexible limits, each card has its unique benefits. Just remember, no matter which card you choose, it’s essential to make payments on time and keep your balance low. That’s how you’ll show lenders you’re trustworthy and boost your credit score. So don’t wait. Start building your credit history with the right credit card today!

Frequently Asked Questions

What is the importance of a strong credit history?

A strong credit history is vital as it demonstrates financial discipline and responsible lending behavior to lenders. It impacts your credit score, thereby influencing your eligibility for loans, the interest rates you get, or even job prospects and housing applications.

How can one develop a good credit history through the use of credit cards?

One can build good credit history through timely repayment of credit card bills, keeping low balances, and leveraging card features. Cards like Discover it® Secured Credit Card and Capital One® Secured Mastercard® are helpful as they report payment history.

What is credit utilization and why does it matter?

Credit utilization is the ratio of your card balance to the credit limit. It’s a key component in the calculation of credit scores. Keeping balances below 30% of your credit limit can positively impact your credit score.

Are there any specific cards that help in building a credit history?

Cards like Discover it® Secured Credit Card, Capital One® Secured Mastercard®, and Journey® Student Rewards from Capital One® can be beneficial in building a credit history due to their specific features such as reporting payment history and offering flexible credit limits.

How does responsible lending behavior impact credit scores?

Responsible lending behavior, demonstrated by timely payments, manageable balances, and good credit utilization, positively impacts credit scores. Better scores increase the chances of loan approvals at favorable interest rates.

Author Profile

Kathy Hardtke
Kathy Hardtke
I am thrilled to have been invited to blog about my experiences trading stock and options with Rich Dad.  Since 1998, when I picked up my first Rich Dad book “Rich Dad Poor Dad”, I have been hooked on Robert and Kim’s philosophies on becoming financially free through investing.  Their books and courses have changed my life as well as my daughter’s life, whom I am now teaching all I have learned about trading stock and options.

My experience has been in the real estate and finance industry for 20 years.  I was a Realtor with ERA, a Mortgage Loan Officer with Bank of America, and a Financial Advisor with Morgan Stanley.  Each time I chose a career that I thought I would get “the inside track” on investing and each time I learned it was just a “job”, although very good job and I was lucky enough to enjoy my career.  Simply put, these jobs would only get me a paycheck but never take me to financial freedom and the dreams and lifestyle I was looking to achieve.

With that said, I have no desire to make millions to have expensive “things” but I do have a dream to not only become financially free for myself and my family but also for others.  I started an organization called GROW Africa to help others.  We build wells in the farthest reaches of the earth in the bush of Zambia.  The women and children have to walk up to 4 hours each way to carry as much water as they can carry back.  I thought that was such a basic human need, that I felt I needed to do something about it, and did.

What is super cool about the training I received through Rich Dad Education on trading stocks and options is, now that I am educated on the Rich Dad stock trading system, I can trade anywhere in the world, including while I am in remote Africa building wells, providing water for those with little or none, as long as I have a power source and a satellite internet card.  Now that is freedom!

I am looking forward to sharing my experiences about trading stocks and options and walking with you on the path to financial freedom.  This is a process of building your wealth consistently over time, then passing it on to your children creating generational wealth.  I wish you all success and can’t wait to hear some of your stories of success as time ticks on!

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