Credit cards to build credit: secured, student and starter cards compared
You need credit to get credit. If you have a thin file or a damaged one, a starter card is the most common way in. The key is that the card reports your payments to the three nationwide credit bureaus.
Secured credit cards
You put down a cash deposit, for example $500, which usually becomes your credit limit. You use and pay the card like any other. The CFPB lists secured cards as one of the main ways to start or rebuild credit. Look for:
- reporting to all three bureaus
- no or low annual fee
- a clear path to “graduate” to an unsecured card and get the deposit back
Other starter options
- Student cards: for college students with little history, usually with low limits.
- Store and gas cards: easier approval and low limits, but often very high APRs.
- Credit builder loans: a bank or credit union holds the loan amount in savings while you make small payments, often over 6 to 24 months, then releases the money.
The CFPB notes that debit cards, prepaid cards, payday loans and most “buy here, pay here” car loans generally do not build credit, because those payments are not usually reported.
Habits that build a score
- Pay on time, every time. Payment history is the largest factor in most scores.
- Keep the balance low. Using less than about 30% of the limit, and ideally much less, helps.
- Pay the statement balance in full to avoid interest.
- Do not apply for many cards at once. Each application can add a hard inquiry.
How long it takes
Most scoring models need at least six months of reported activity to produce a score. Steady use for a year typically opens the door to unsecured cards with better terms.