How I built my credit with a credit card?

There was a time when my credit score was painfully low around 620. It felt like an endless cycle. My score was too low to qualify for good credit cards but without good credit history, it would not improve. That all changed when I got strategic about using a credit card to build my credit responsibly.

Here is the step-by-step approach I took to go from a fair score in the 620s all the way up to an excellent score over 780 today. With discipline and the right plan, you can turn credit cards from a potential pitfall into a powerful credit-building tool.

Choosing the Right Starter Credit Card

When my credit journey began in 2018 I knew my options were limited with a mediocre 620 score. After researching my choices I landed on the Capital One Platinum Secured Credit Card. Here’s why it was a good fit:

• Secured cards are generally easier to get approved for when you have poor or no credit history
• Capital One is a major, reputable issuer (as opposed to shady subprime card pushers)
• While not a flashy rewards card, the Platinum had reasonable fees and no crazy penalties

The lesson? Don’t be overly ambitious at first. When building credit, start with a product suited for your current credit profile – even if it’s a plain vanilla secured card.

Read also this: How to Improve Cash Flow with Purchase Order Financing?

Mastering the Credit card Utilization Ratio

One of the biggest tips I learned early on was keeping my credit utilization ratio in check. This is the percentage of your total credit limit you’re using at any given time. For the best credit scores, you want to keep this ratio below 30%.

For example with my initial $500 limit on the Capital One card, I made sure to never carry a balance higher than $150 (30% of $500). It wasn’t easy at times, but I made a habit of paying down my balance frequently to stay in that target range.

Pro Tip: If you establish a solid payment history you can call your issuer and firmly but politely ask for a credit limit increase every 6-12 months. Higher limits make it easier to keep your utilization ratio down.

The Power of Payment History of credit card

While utilization is important, nothing impacts your credit scores quite like payment history. Your record of on-time payments is the biggest piece of the credit scoring formula.

When I first got my Capital One card, I decided any balance would be paid in full every month, no exceptions. I set up payment reminders and made it non-negotiable. Sure enough, after 18 months of this flawless history, Capital One rewarded me by graduating me from a secured card to an unsecured Capital One Quicksilver Cash Rewards Credit Card.

My scores started climbing thanks to this pivotal first credit card account. It proved I could manage credit responsibly over an extended period.

Also read this: Best CD Rates From Top Banks For June 2024

Expanding Your Cards Strategically

Fast forward to 2021, and my credit score finally reached the good 670+ range. That opened up many more rewarding credit card opportunities, including cards that were once just a dream:

• American Express Gold Card (4X dining/groceries, 3X flights)
• Chase Sapphire Preferred (2X travel/dining, great transfer partners)
• Discover it Cash Back (5% rotating quarterly categories)

Rather than going on an app-spree, I applied for just a few choice cards that complemented each other in my spending patterns. By implementing the same habits under 30% utilization paying on time – my scores continued their upward trajectory.

Evolving Your Card Strategy

By 2024, my credit was officially “excellent” per FICO standards. But my goals and priorities evolved, so my credit card strategy changed too:

• I upgraded to the premium Capital One Venture X Rewards Credit Card for superior travel benefits
• I downgraded my Amex Gold to the no-annual-fee Capital One Savor One Cash Rewards Credit Card
• I kept my oldest Capital One Quicksilver account open to preserve my credit history and increase my average age of accounts

Your credit cards should be optimized for your current situation. Don’t be afraid to change, close, or open new accounts when it makes sense for maximizing your returns and credit.

Frequently Asked Questions

How long does it take to build credit from scratch?

There’s no set timeline, as it depends on your unique credit profile and usage. You may see an initial credit score after 6 months of having your first credit account open and active. But building excellent credit in the 750+ range can take 1-2 years of sustained responsible credit behavior.

How many credit cards should I have to build good credit? 

There is no magic number, but 2-5 credit card accounts that you use responsibly is a reasonable range for most people. The length of your credit history and your overall utilization ratio matter more than your number of accounts.

Will closing a bunch of unused credit cards hurt my credit? 

Closing multiple cards at once especially older accounts can negatively impact your credit scores by:

• Reducing your total available credit and making your utilization ratio appear higher
• Shortening your overall average length of credit history

It’s generally better to keep unused accounts open and revisit your card strategy annually rather than closing many accounts rapidly.

Can I build credit without a credit card? 

While credit cards are one of the most powerful credit-building tools, you can also build credit history through other types of accounts reported to the major bureaus, like:

• Personal loans or student loans
• Secured credit cards
• Becoming an authorized user on someone else’s longstanding account
• Certain recurring bills like utilities rent payments etc. through non-traditional credit reporting

Having a mix of different active credit types can contribute to higher scores over time.Let me know if you have any other questions! Building excellent credit is very achievable with knowledge and the right strategic plan.

The Bottom Line

Looking back, it’s amazing to see how far my credit journey has come – from a measly 620 to over 780 today. By using credit cards as strategic credit-building tools through:

1. Choosing starter products for your credit level
2. Maintaining a low utilization ratio
3. Prioritizing on-time payments above all else
4. Gradually expanding responsibilities
5. Adapting your strategy as needs change

You can build excellent credit scores that open up the best credit card offers and more. It takes diligence, but the payoff of accessing higher credit limits, lower interest rates, and premium rewards is immense.

My advice? Check your official credit reports frequently (you can get free weekly reports from all three bureaus through 2023). Identify areas to improve, use tools like CardMatch to get prequalified matches, and never underestimate the credit-building power of a strategic credit card plan.