5 ways opening a credit card and using it responsibly can boost your credit score

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Crystal Cox/Business Insider

As long as you stay on top of your credit card payments, your account can play a key role in raising your credit score.

  • If you're looking to build and improve your credit score, opening and using a credit card could be a great strategy, but only if you're able to pay it off each month.
  • Credit scores are calculated using a variety of factors, including your payment history, amounts owed, length of credit history, new credit, and credit mix.
  • Credit cards are convenient tools for improving your credit score if you use them strategically, e.g., if you manage your credit utilization ratio and consistently make payments on time.



  • Secured credit cards and cards that offer an intro APR are ideal for improving credit. Such cards include the Capital One® Secured Mastercard®, Blue from American Express®, and Chase Freedom®.

  • See Business Insider's list of the best credit cards.

A good credit score isn't merely something to brag about; it can help you secure a favorable interest rate when you're applying for a mortgage, auto loan, or new credit card.

There are numerous ways to improve your credit score, including paying your bills on time and taking out multiple lines of credit. If you're working to boost your score, the most efficient plan of action may be to use one or more credit cards responsibly. One or two cards can help you achieve multiple goals and gradually improve your credit score.

How credit scores are calculated

FICO, VantageScore, and TransRisk are just a few examples of credit-scoring models. Your exact score will depend on which model you're looking at, and each model places a different amount of emphasis on the factors that make up your score. The most common model is probably FICO, with scores ranging from 300 to 850. Here's how those numbers break down:

• Under 580: poor

• 580-669: fair

• 670-739: good

• 740-799: very good

• 800+: exceptional


How are credit scores calculated? FICO assesses the following factors to compute your score:

• Payment history: 35%

• Amounts owed: 30%

• Length of credit history: 15%

• New credit/inquiries: 10%

• Credit mix: 10%


If you're wondering how you're doing in each area, you can check your credit score for free by visiting Credit Karma, Credit Sesame, or Credit.com.

I use Credit Sesame, which creates a report card for your credit score and assigns grades for each category, so you can see where you're thriving and where you're struggling. Credit cards can be optimal tools for making progress in these five areas.

Using credit cards to improve your credit score

Here are five ways that using a credit card can positively impact the elements that determine your credit score, from payment history to your length of credit history.

1. Make your monthly credit card payments on time

Paying all your bills by their due dates, including your credit card bill, is the easiest way to boost your credit score. This task falls under the "payment history" category, which accounts for 35% of your credit score.

Late payments of 30 days or more can stay on your credit report for seven years. However, after proving for an extended period of time that you can make payments promptly, you can always try calling the credit card company to ask if it can remove the demerit from your report, especially if you can give a legitimate reason for having missed the payment.

Read more: I have 18 credit cards. After years of struggling to keep them straight, here's the best strategy I've found so far

2. Keep a small balance to lower your credit utilization ratio

Your credit utilization ratio is the relationship between how much credit you can use versus how much credit you are using. It's the balance you carry on your credit cards in relation to your credit spending limit across all credit card accounts you have open.

This falls under the "amount owed" category, which makes up 30% of your FICO credit score. The less you owe, or the lower your credit utilization ratio is, the better. Avoid charging more to the card than you can handle - you should pay the total statement balance every month.

3. Increase your spending limit to lower your credit utilization ratio

What's the spending limit on your credit card? $5,000? $15,000? Maybe it's somewhere in between.

When it comes to building credit, this spending limit can be much more powerful than you'd think. If you have a high spending limit and low balance, your credit utilization ratio will be lower than if you have a low limit and a low balance. For example, if you have a balance of $1,000 on a card with a $6,000 limit, your utilization ratio is 16.6%. A balance of $1,000 on a card with a $12,000 limit comes to a ratio of 8.3%.

How do you increase your spending limit? You should be able to call the credit card company customer service number to request the change. When I made this call, it took less than 10 minutes. You can't guarantee that they'll say yes, but they won't penalize you for asking.

If you think raising your spending limit will tempt you to overspend, you should refrain from increasing the limit. Not only will this make you accumulate debt, but your credit score could also drop if you can't afford to make payments to keep the balance low.

4. Keep the same card open for a long time

This strategy falls under "length of credit history," which makes up 15% of your score. If you're tired of paying off your credit card, you may be tempted to cancel the card altogether. This could be the right move for you, but if the ultimate goal is to build credit, you may want to reconsider.

Lenders want to see that you can use credit responsibly for a long period of time. The longer you have a line of credit and use it responsibly, the better it looks. Especially if a card has no annual fee, consider keeping it open - you can put it in a sock drawer or somewhere else out of sight. You should still use it once every year or two to make a small purchase (and pay it off), so the credit card issuer doesn't assume your account is inactive and make the decision to close it.

I currently have a C in the "credit age" category on my Credit Sesame report card. I only have one credit card, and I've had it for less than three years. Credit Sesame recommends owning a card for at least five years to really boost a score.

5. Negotiate a lower APR on your card

If you find yourself in a situation where you can't pay off the total balance on your card every month, your balance accrues interest - unless you have an introductory APR offer. If the annual percentage rate (APR) on your card goes down, you'll pay less in interest. This could make it easier for you to pay off your card and/or make payments on time, thus improving your credit score.

I negotiated my APR recently. My income has increased since I applied for the card a few years ago, so I called a customer service agent to ask if this factor could allow me to qualify for a lower APR. Within five minutes, my APR dropped 3%. It never hurts to call and request a lower rate.

Read more: The best credit cards with intro APR offers

Credit card picks for improving your credit score

Capital One® Secured Mastercard®

Secured credit cards are aimed at users with no credit or poor credit, and you can use them to improve your score. Secured cards require users to make a deposit when they sign up. This deposit makes it less risky for an issuer to do business with someone who has a poor credit history. Once you're approved for a Capital One Secured Mastercard, you can make a $49, $99, or $200 refundable deposit and receive a $200 spending limit.

Once you've made payments on time for five months, your spending limit increases. This means good things for your credit utilization ratio. There's no annual fee, which is a good way to save money. Users might be disappointed by the card's lack of a rewards program, but you may choose to apply for a second credit card that does offer a rewards program after building credit with your Capital One Secured Mastercard.

Click here to learn more about the Capital One Secured Mastercard »

Blue from American Express®

Borrowers with a poor or fair score may qualify for a Blue from American Express card. There's no annual fee, and you can earn 1 Amex Membership Rewards point per dollar spent. You can use these points to pay for things like travel, hotels, and gift cards. The main downside is that the interest rate is pretty high - it's a 24.99% variable rate. If you struggle to keep your balance low, this high rate could quickly rack up the amount you owe.

Chase Freedom

You'll probably need a credit score of at least 670 to be approved for the Chase Freedom card. That makes this card ideal for people who already have a good score but are aiming for a very good or exceptional score.

This cash-back card offers a 0% APR on purchases and balance transfers for the first 15 months, which is a longer introductory period than many competing cards. No interest rates can make it easier to make payments on time and keep a low balance. Once the introductory period ends, the variable APR ranges from 16.49% to 25.24%.

You only have to charge and pay off $500 in your first three months to earn a $150 sign-up bonus. $500 is a lower threshold than many other cards offer for sign-up bonuses.

Click here to learn more about the Chase Freedom »

Student credit cards

If you're a student with a limited credit history, there are several credit cards targeted to you, both in terms of the benefits they offer and the standards for getting approved. These include the Discover it® Student Chrome, the Capital One® Platinum Credit Card, and the Journey® Student Rewards from Capital One®.

Read more: The best credit cards for students looking to build credit

There are many incentives for using a credit card, like sign-up bonuses, rewards programs, and convenience. However, if your main objective is to increase your credit score, these three credit cards can help you reach that goal.

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