There are many ways that you can build and establish credit. Your credit score is made up of a number of factors, two of which are how much you currently owe and your overall payment history. As such, applying for and responsibly using a credit card can help build your credit, as can paying off your credit card statement on time and in full.
When deciding how much to use your credit card to build credit, it’s a bit of a balancing act. If you simply have a credit card but don’t use it, it may not improve your credit score very much. But if you spend too much on your credit card, you may damage your score. Building your credit comes down to finding the sweet spot between not using your card at all and using it too much.
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How Making Purchases With Your Credit Card Could Possibly Help Your Credit Score
The amount of credit that you use and your overall payment history are two of the most important factors that determine your credit score. As you start to establish credit, you’ll want to responsibly use your credit card, making sure to keep your spending low in comparison to your overall credit limit. You’ll also want to make at least the minimum payment by the statement due date or, even better, pay off your statement balance in full each month.
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Minor Purchases to Build Credit
As you work toward building your credit, you’ll likely want to put some of your everyday purchases on your credit card. Just make sure that you set aside enough money to pay off your statement balance when it comes.
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Groceries
Groceries are one of the biggest monthly expenses for many families and households, so it can make sense to put your grocery purchases on your credit card. Most grocery stores accept credit card payments for no additional charge. Then you can plan to pay off your statement balance by the due date to help build your credit.
Gas
Gas is another large expense for many people. Most gas stations accept credit cards with no additional charges. Plus, paying for gas with a credit card is also usually more convenient. Keep in mind that some gas stations may offer a discount for paying for gas with cash, which can be a good way to save money on gas.
Utilities
Admittedly, utilities can be challenging to pay with a credit card. Some utilities may offer online payments with a credit card without a fee, though others may only allow fee-free payments by cash, check, or ACH. Unless you can find a way to dodge fees, it doesn’t make financial sense to pay a convenience fee just to pay bills with your credit card.
Coffee
If a daily coffee run is part of your regular routine, consider paying for it with your credit card. That way, you can earn credit card rewards and possibly build your credit, too, from a purchase you’d be making anyways. Also check if your coffee shop offers its own rewards program — you’ll want to make sure to sign up for that as well to take advantage of perks and offers.
Streaming Subscriptions
If you have recurring monthly subscriptions to places like Netflix, Hulu, or Disney+, that can be another cost to move over to your credit card. Setting up those recurring streaming subscriptions for autopay can help ensure your service is not interrupted and possibly build up your credit history.
Gym Membership
A gym membership is another potential cost to pay with a credit card in order to build up your credit. You’ll want to make sure that you are getting value from your gym membership, however. If you find that you rarely go to the gym, you might get better value from canceling your membership and saving or investing that money.
Entertainment
If going out to eat or other forms of entertainment are frequent monthly expenses for you, consider covering those with a credit card. Having a variety of expenses on your credit card statement can help you stay organized and more easily track your spending — plus, you could build your credit in the process.
Major Purchases to Build Credit
Besides everyday smaller purchases, it can make sense to use a credit card for major purchases as well. Many credit cards offer price protection or an extended warranty, which can provide additional benefits.
Car
Whether or not you’ll be able to use a credit card to pay for a car purchase will depend on the policies of the place where you’re buying the car. Some dealerships will allow you to cover the full cost of the car with a credit card, while others only allow credit cards for partial payment, such as the down payment.
Just make sure to negotiate a final price before you offer to pay with a card — otherwise, the dealer may try to charge a higher price to make up for credit card processing fees.
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Jewelry
Jewelry is another big-ticket item that you might cover with a credit card. Talk with the store where you’re making your purchase to see what options are available. Some jewelry stores might offer a discount for paying with cash, which might sway you in the choice between cash or credit card.
Home Appliances
There are several reasons it can make sense to buy large home appliances with a credit card. Not only could you earn rewards and build your credit, but the credit card you use may also offer credit card protection. This can potentially save you hundreds of dollars or more if you end up having a problem with your appliance down the road.
Taxes
It is possible to pay your taxes with a credit card, though there are very few ways to do it for free. Depending on where you live and the type of taxes you’re trying to pay, you’ll likely pay a convenience fee of 2% to 3%. Still, depending on what kind of rewards your card earns and your overall financial situation, it can make sense to pay taxes with a credit card.
The Takeaway
Just having a credit card may help build credit some, since your total amount of available credit plays a factor in determining your credit score. But if you’re really looking to build credit, you’ll want to use your credit card, and use it responsibly. Put some of your regular purchases and big-ticket items on your credit card, and make sure to have a plan to pay your statement off in full, each and every month.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What is a credit score?
Your credit score is a number that lenders can use to help determine how likely you are to repay your debts and obligations. The higher the credit score, the better, with the maximum credit score being 850.
What items help you build credit?
There are a variety of factors that make up your credit score, including the age and type of credit accounts you have, how much of your available credit you’re using, and your payment history. Responsibly using your credit card and paying off your balance in full and on time, for example, can help to build credit.
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What is the fastest way to build up your credit?
There generally are not any magic bullets to build up your credit from scratch fast. That said, one of the best ways to build up your credit is to show a history of reliably paying your bills on-time, each and every month. The longer your track record of using your existing credit responsibly, the better it is for your credit score.
Photo credit: iStock/Tingting Ji
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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