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Best Credit Cards to Build Credit

Best Credit Cards to Build Credit

*Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Sep 02, 2020. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

If you’re looking to establish or build your credit profile, history and credit scores, signing up for a credit card and using it responsibly is perhaps one of the best ways to do so.

When choosing a credit card, it’s most important to look for one that reports to the three major credit bureaus (Experian, Equifax and TransUnion), accepts individuals with poor, fair or limited credit and offers a low annual fee.

Based on our research of cards available through CompareCards, as well as top cards offered by major issuers, we’ve selected our picks for the best credit cards to help build or establish credit.

Comparing the best credit cards to build credit

There are numerous credit cards available that can help individuals with fair or limited credit establish or rebuild their credit. We chose the following unsecured, secured and store credit cards based on a variety of factors, including credit requirements, annual fees, rewards rates, APRs and more.

Best credit cards to help build credit

 Credit levelRewards ratePurchase APRAnnual fee
Capital One® Platinum Credit CardFair creditnon-rewards card26.99% (variable)$0
Discover it® SecuredNew to credit or rebuilding credit2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically22.99% variable$0 (Security deposit of $200 - $2,500 required)
Capital One® QuicksilverOne® Cash Rewards Credit CardFair credit1.5% cash back on every purchase, every day26.99% (variable)$39
Bank of America® Cash Rewards for StudentsNew to creditEarn 3% and 2% cash back on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%0% Introductory APR for the first 12 Statement Closing Dates, then 16.24% - 26.24% variable$0
Target RedCard Credit CardFair credit5% discount on Target and Target.com purchases22.90% variable$0

Best $0 annual fee credit card to build credit: Capital One® Platinum Credit Card

The Capital One® Platinum Credit Card is a solid option for those who want to improve their fair credit with an unsecured credit card, meaning you won’t have to submit a security deposit. In addition to charging a $0 annual fee, Capital One will automatically review your credit line starting at six months.

The Capital One® Platinum Credit Card also offers several tools to help manage your account, including unlimited access to your credit score through CreditWise, account alerts, autopay and more.

What to look out for. If you carry a balance on your Capital One® Platinum Credit Card from month to month, you’ll be subject to high interest charges at a rate of 26.99% (variable) APR. So, it’s best to only charge what you can afford to pay off in full every month.

Capital One® Platinum Credit Card review.

Best secured credit card to build credit: Discover it® Secured

  • 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically

  • Credit line will equal your security deposit of $200 or more*

  • No annual fee, no late fee on your first late payment. No penalty APR*

Highlights
  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • It's a real credit card. You can build a credit history with the three major credit bureaus. Generally, debit and prepaid cards can't help you build a credit history.
  • Establish your credit line by providing a refundable security deposit of at least $200 after being approved. Bank information must be provided when submitting your deposit.
  • Automatic reviews starting at 8 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score
  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
  • See Rates & Fees

See additional details for Discover it® Secured

More Info

The Discover it® Secured offers cash back on every purchase — which is rare for a secured credit card.

Cardholders earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically. The $0 annual fee card also matches all of the cash back you’ve earned at the end of your first year.

Additionally, after eight months, Discover will automatically review your account to see if you qualify to receive your security deposit back and convert to an unsecured card.

What to look out for. Although the Discover it® Secured card charges a $0 annual fee, it requires a minimum security deposit of $200 to open your account, and your credit limit will be determined by your income and ability to pay (up to $2,500). That said, starting at eight months, Discover will automatically review your account to see if you qualify to receive your security deposit back and convert to an unsecured card.

The Discover it® Secured has a regular purchase APR of 22.99% variable.

Discover it® Secured review.

Best flat-rate credit card to build credit: Capital One® QuicksilverOne® Cash Rewards Credit Card

Designed for individuals with fair credit, the Capital One® QuicksilverOne® Cash Rewards Credit Card provides a straightforward approach to earning cash back.

Cardholders earn a flat rate of 1.5% cash back on every purchase, every day, which can be redeemed for statement credits, checks or gift cards. You can also apply cash back to directly cover a recent purchase.

The Capital One® QuicksilverOne® Cash Rewards Credit Card offers unlimited access to your credit score through CreditWise. Plus, starting at six months, Capital One will automatically review your account to see if you qualify for a higher credit limit.

What to look out for. The Capital One® QuicksilverOne® Cash Rewards Credit Card charges an annual fee of $39. Additionally, the card has an ongoing purchase APR of 26.99% (variable).

Capital One® QuicksilverOne® Cash Rewards Credit Card review.

Best student credit card to build credit: Bank of America® Cash Rewards for Students

Students looking to build credit can do so while earning a generous cashback rate with the Bank of America® Cash Rewards for Students.

Cardholders earn 3% and 2% cash back on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%. Plus, earn a $150 cash rewards bonus after making at least $500 in purchases in the first 90 days of your account opening.

The Bank of America® Cash Rewards for Students card offers a 0% Introductory APR for the first 12 Statement Closing Dates, which is ideal if you need to finance a large purchase, like a laptop or school books. Once the intro APR ends, you’ll be subject to an APR of 16.24% - 26.24% variable on any unpaid portion of your balance.

Additionally, the $0 annual fee card provides free access to your FICO® Score, as well as overdraft protection when you link an eligible Bank of America checking account to your credit card.

What to look out for. While the Bank of America® Cash Rewards for Students card offers a long intro APR on purchases, keep in mind that it’s important to pay your balance in full before the introductory APR ends to avoid incurring high interest charges on any remaining balance.

Bank of America® Cash Rewards for Students review.

Best store credit card to build credit: Target RedCard Credit Card

Store credit cards, such as the Target RedCard Credit Card, can be a good tool to help build credit while saving money or earning rewards at your favorite retailer and are relatively easy to qualify for.

The Target RedCard Credit Card offers a 5% discount on Target and Target.com purchases, which is automatically deducted at checkout. Plus, the $0 annual fee card provides exclusive perks, such as free two-day shipping and extended returns.

What to look out for. The Target RedCard Credit Card comes with a purchase APR of 22.90% variable and can only be used at Target stores and Target.com.

If you don’t regularly shop at Target, you may be better off with a different store credit card. For example, if you frequently shop at Walmart, you may want to consider the Capital One® Walmart Rewards™ Card. Or, if you are an Amazon Prime member and regularly shop from Amazon, the  Amazon Prime Rewards Visa Signature Card may be a better choice. Both cards offer similar shopping discounts as the Target RedCard Credit Card.

Target RedCard Credit Cardreview.

Best ways to build credit with a credit card

Whether using a traditional credit card, secured credit card, store credit card or student credit card, a key factor in building your credit is to use the card responsibly. That includes:

  • Paying your balance on time and in full each month. Since payment history is the most important factor of your credit score, you should always pay your credit card bill on time each month. It’s also a good habit to pay in full so that you avoid carrying a balance from month to month and incurring interest charges.

How does a late payment affect your credit score?

  • Maintaining a low credit utilization ratio. It’s generally recommended that you keep your credit utilization ratio — the amount of credit you use divided by the total amount of available credit you have — below 30%. For example, if you have a credit card limit of $3,000, you should keep your card balance under $900.
  • Only apply for a credit card when it’s truly needed. Each time you apply for a major loan, such as a new credit card, a hard inquiry appears on your credit — which lowers your credit score by a few points each time one occurs and stays on your credit report for two years. If you have too many hard inquiries in a short period of time, it may signal to lenders that you are a high-risk consumer.

How To Use a Credit Card to Build Credit

What is a good credit score?

Because credit scores play a crucial role in determining whether you’ll be approved for an apartment lease, car loan, home mortgage and even some jobs, it’s important to establish a credit score that’s in the good to excellent range.

Credit scores generally range from a low of 300 to a high of 850. While the credit ratings vary depending on the credit scoring model, the FICO® Score ranges as follows:

Wondering What Is Considered Good Credit? We Decode FICO® Scores.

Credit card issuers also use certain parameters to determine an applicant’s creditworthiness. For example, Capital One describes applicants who are rebuilding credit as those who have defaulted on a loan more than once or have been declined for a credit card in the last three months. Fair credit individuals, according to Capital One, are those who have defaulted on a loan in the past five years or those who have had a credit card or other credit for less than three years.

Paying off $500 in debt boosts credit score by 7 points on average

Key findings

  • Borrowers improve their credit scores by nearly 7 points — on average — when they pay off $500 in credit card debt within a month’s time.
  • Consumers with fair to very poor credit scores have a lot to gain from paying off debt. Our data shows that borrowers with credit scores between 300 and 639 can increase their scores by an average of more than 13 points by paying off $500 in credit card debt.
  • Borrowers in stronger financial positions can still improve their finances by paying down credit card debt. Our analysis shows that good-to-excellent borrowers with credit scores between 720 and 850 increase their scores by just over 2 points on average after paying down credit card debt by $500.
  • Consumers with less credit card debt see greater credit score gains. Borrowers with credit card balances between $500 and $1,500 see average credit score gains of just over 9 points when paying down $500 in debt.
  • Borrowers who substantially lower their utilization rate see considerable credit score gains. Consumers see average credit score increases of 19 points when they lower their utilization rate by 10% or more by paying off $500 in credit card debt.
    • Those 19 points added to a credit score could mean the difference between being approved for a credit card with a low APR and great rewards — or not.
    • Those whose utilization rate increased, either through additional debt or a reduction in credit, saw effectively no credit score changes. The drop is less than 1 point, on average.

Methodology

To estimate how paying off $500 in credit card debt improves credit scores, researchers sampled April to May 2020 data from more than 5,000 My LendingTree users who paid off between $500 and $550 in credit card debt over a one-month period. We then tracked the changes in their credit scores.


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