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The Best Way to Build Credit in Every Situation

Building credit is easy and fast when you strategically use credit cards and pay off the debt.

If you want to achieve a better credit score, you need a strategic plan for building credit. The strategy you want to use varies a little, based on where you are in your life. But the fastest and best way to build credit, in general, is a system of strategically using three credit cards. This allows you to quickly build credit history, while helping to ensure you stay in a manageable range of debt.

The best way to use a credit card to build credit

Credit cards are good for building credit for a few reasons:

  • They’re relatively easy to get, even if you have bad credit or no credit.
  • You can use them to cover costs that are already in your budget.
  • You control how much you charge, so you don’t get overextended with debt.

Here is what the strategy looks like step-by-step:

  1. First decide what you want to use your credit card for.
    1. Ideally, choose a cost that’s already a recurring cost in your budget, such as groceries, gas, or tolls
  2. Then use the card to cover those charges throughout the month.
  3. At the end of the month, pay off the balance in-full.
  4. Repeat this month after month to build credit quickly.

If you start and end a billing cycle with no balance, you don’t pay interest charges. That means this method allows you to use credit interest-free. It also helps ensure you don’t get into trouble with debt.

The reason this is good for your credit is that:

  1. It builds positive credit history, which is the number one factor used to calculate credit scores.
  2. It keeps your credit utilization ratio at 0%, which is the best net utilization ratio you can have; utilization is the second biggest scoring factor

Since you improve the two biggest scoring factors at the same time, this is the quickest way to build credit.

Applying this method with three credit cards builds credit faster


The more accounts you can maintain in good standing, the faster you can achieve the score you want. This means three cards are better than one. Three is also a good number, because it means you can get different cards for different purposes.

For example:

  1. You have a gas rewards card to get gas
  2. A cash back rewards card to earn cash back on purchases
  3. A low APR credit card for larger purchases

Things like rewards credit cards and gas cards should really always be paid in-full using the method above. You don’t want to leave a balance on a rewards card because high interest charges quickly offset the rewards you earn.

This is why we recommend that one of the three cards you have is a card with low APR. This is the card you use for large purchases – things you need to pay back over a few billing cycles. You make charges on the other two cards that you pay back in-full each month. Then you make larger purchases on the low APR card and pay off the balance in big chunks at a lower interest rate.

Three cards are three times the positive credit history. It also bumps up your total available credit limit, which is half of credit utilization. Utilization measures current total balance versus total available limit.  If you have one card with a $1,000 and a $500 balance, your utilization ratio is 50%; that’s high, which is bad for your score. But if you have three cards with a $1,000 limit each and a $500 balance, your utilization is 16%; that’s good.

More credit limits make it easier to maintain a low ratio. Just be careful, because it also increases your risk to overcharge and run into debt problems.

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Do more credit cards make building credit even faster?

Yes. More accounts mean more history and higher limits for utilization. Another factor for scoring is number of accounts in good standing.  This includes loans and credit cards. It doesn’t have a large impact, but it is a factor. So, as long as you can afford to manage the debt and maintain the accounts in good standing, more is better.

This means you may choose to have a travel rewards card, cash back rewards, gas card and low-APR card. You may also decide to open store credit cards. Just always make sure:

  1. You can maintain control over your debt
  2. Your utilization ratio stays below 30% (any higher is bad)
  3. You can keep the cards active – i.e. you can’t open a card and not use it; the creditor will close the account due to inactivity
  4. Also don’t open too many new accounts at once; too many inquiries is bad for your score, too.

The Best Way for ________

What is the best way to build credit at 18?



If you’re 18, you can’t open a credit card without a cosigner. The cosigner can be a parent, legal guardian, spouse or any person over the age of 21 with the ability to repay the debt. Talk to your parents and ask them if you can get a credit card to start building credit. They will need to provide written authorization to open the account.

If you need to talk them into it, let them know that federal law says they must also authorize credit limit increases. That means they can set a reasonable limit so you can’t go crazy and overcharge. Once you have the card, use it to cover an expense your parents want you to pay, like gas. At 18, you don’t need three cards. One card that you pay in-full every month will suffice to build your score up as you move towards financial independence.

What is the best way to build credit as a college student?



If you’re under 21, refer to the question above. Once you hit 21, you won’t need a cosigner. However, you may have a hard time getting approved for traditional unsecured credit cards. In this case, apply for a secured credit. This is a card you can open if you have no credit yet. You simply put down a cash deposit and get a limit equal to what you put down. So, if you open the account with $250, you get a $250 limit. Then you just follow the directions above to build.

If you need a car for school, also consider getting a small auto loan in your name. If you do this before you build up a score, you may need your parents to cosign. But as long as your name is on the loan, this will help you build credit history, too.

What is the best way to build credit from scratch if you’re new to the country?



In this case, get a secured credit card first. Put down a cash deposit to open the credit line, then use the card responsibly. Once you have at least some history, get another card or a loan. You can either get an auto loan or a small personal loan. Gradually add accounts and make sure you can manage the debt comfortably before you add more.

This process will take about 1-2 years to achieve a good score.

What is the best way to build credit back up?

If you have a 620, you can qualify for a mortgage, but it is better to erase your bad credit score


If you’ve gone through bankruptcy, foreclosure or just a period of financial hardship that led to bad credit, you need to rebuild. The first and most important question is whether you have existing debts that need to get repaid. If you do, then you don’t need new financing or cards to build back up. That’s good, because you probably want to avoid new debt at least until you establish

For example, let’s say you went through bankruptcy. Most of your debts were discharged, but you still have student loans to repay. Great! Make a plan to pay them off as quickly as possible, making sure you won’t incur any early repayment penalties. Paying off your loans builds positive credit history. Then, once those debts are gone, you can consider getting other loans or a credit card.

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Article last modified on September 11, 2018. Published by, LLC . Mobile users may also access the AMP Version: The Best Way to Build Credit in Every Situation - AMP.