You Can Build Credit Fast With a Credit Card. Here’s How.

If you have no credit, you probably think it’s nearly impossible to get approved for a credit card, let alone be able to use a credit card to build credit.

It’s likely true you won’t get your top-choice card, but it’s really just a matter of targeting the right ones. And once you have a credit card, you’ll find it’s one of the best ways to build credit.

Now, I’m not talking about a fancy rewards credit card that gets you into multiple airport lounges. No, your card might have rewards, but you won’t be sitting in a suite sipping free cocktails.

Here’s the thing: It doesn’t matter. Your first credit card is a tool for building credit. That’s your focus for now. The fancy cards can reside in your wallet later.

But what if you aren’t comfortable getting your own credit card right now? Maybe it’s all new to you, and you want to learn the ropes first. You can get started by piggybacking on another person’s credit.

If you have a parent, relative or close friend who has great credit, then becoming an authorized user may be an option. This is called piggybacking because, as an authorized user, you get to build a credit history without having to qualify for your own card.

This arrangement works if you and the account owner have a detailed chat about what you can purchase with the card and what your dollar limit will be. If you purchase too many items with the card, then the account owner’s credit takes a hit. Don’t let that happen. You have a great opportunity to build credit, so track your spending and use the card responsibly.

If you’re ready to take the credit card plunge, get comfortable. We’re going to go over four different options: secured credit cards, student credit cards, unsecured credit cards and retail credit cards.

When the target market includes people who are trying to build or rebuild their credit, there will always be a few lenders trying to take advantage of this vulnerable group. Read the terms and conditions of secured cards carefully.

But I’ve spent a lot of time researching secured cards, and there are some terrific ones in this category. You should know that applying for a credit card could result in a hard inquiry on your credit report, which usually knocks a few points off your score. Since points are at a premium when you’re new to credit, a few issuers will allow you to get “preapproved” before you apply. The benefit is that if you don’t qualify for the card, you know upfront and you don’t get a hard inquiry with nothing to show for it.

With secured cards, you do have to make a security deposit, and some cards have annual fees. But if you use them responsibly, you can ride these cards straight to the land of fair credit, which is a FICO score between 580 and 669. There are some pretty good unsecured cards available in that category.

Some secured issuers offer unsecured cards, so you might be able to graduate to an unsecured card with the same issuer. But if not, you’ll be in a good position to apply for an unsecured card with another issuer. When you close your secured card account, your security deposit will be refunded to you.

If you’re still in college or grad school, you might qualify for a student credit card. Be aware that many issuers look fondly on good grades. Being a student is hard work, and a good GPA shows your determination and that you have a sense of responsibility.

If you’re under 21, the Credit CARD Act of 2009 requires that you show proof you have enough income to pay your debts. This requirement could be filled with a part-time job, parental support, student loans or other income you receive.

If you don’t have enough income to get approved, you’ll need a co-signer. Only a few issuers allow co-signers on credit cards. If a student card isn’t an option and a secured card doesn’t appeal to you, then consider becoming an authorized user on a parent’s or relative’s credit card to build some credit.

It’s not impossible to get an unsecured credit card with a limited credit history, but you have to be careful with these cards. They might advertise that almost anyone can get approved, but the costs of using one of these cards can be sky-high. And there are a few that don’t have grace periods, which means you start paying interest the day your purchase is posted to your account.

I usually recommend a top secured card over one of these unsecured cards. If you still want to explore these cards, just be sure you read all the fine print. Maybe even read it three or four times. Unsecured cards for those with zero or bad credit also might offer the chance for preapproval.

While retail credit cards can help you build credit, they come with downsides. Make sure to read the terms and know what the interest rate is. These cards are much easier to get than most other cards because the interest rates are high and they usually have low credit limits.

Retail credit cards can be useful for getting information about sales or earning rewards when you shop often at a specific store. But do not carry a balance with these credit cards. Compound interest makes your balance grow quickly. Plus, if your balance exceeds 30% of your credit limit, it can damage your credit score.

The hard part is over. You got your first credit card. Whichever type of card you have, here’s what you need to do to build a stellar credit history and a solid credit score:

Do these four simple steps for six months and you’ll generate a FICO score. If your issuer offers a free credit score, you can watch the number go up each month. There are also free educational scores available online.

Your card activity has to be reported to the credit bureaus for this to work, of course. And if it isn’t clear whether the issuer reports your payment history to all three credit bureaus, then call the lender to confirm before you apply for a specific card.

Be patient and persistent. Over time, responsible credit card use will help you build an excellent credit history and a great credit score.