In case you have a limited credit history, no credit at all, or damaged credit due to mistakes you made in the past, there are ways to turn your situation around. Nevertheless, building credit can be a challenge when your current standing prevents you from getting the best credit cards or a loan approved in your name.
Of course, that is where credit cards for building credit come handy. Whilst the best rewards and travel credit cards are for people with good-to-excellent credit, credit building cards are for individuals with no credit history at all or issues with their credit they are still yet to fix. It is good you keep in mind that some credit cards for credit-building are secured, meaning they require a cash deposit as collateral to get started.
Since you are in search for ways to build the credit you need to qualify for a loan, such as mortgage - or get one of the best credit cards, consider this list of credit-building cards that can get you on the right track.
Table of Contents
What is Credit Building?
Credit building is the process of establishing a positive credit history, which helps you get better interest rates and loan terms in the future. It's essentially about showing lenders that you're a responsible borrower.
Here's how it works:
1. Understanding Your Credit Score:
• Credit Score: A numerical representation of your creditworthiness, based on your financial history.
• Credit Report: A detailed record of your borrowing and repayment activity, maintained by credit bureaus (Equifax, Experian, and TransUnion).
2. Factors Affecting Your Score:
- Payment History (35%): Paying bills on time is the most important factor.
- Amounts Owed (30%): How much debt you have compared to your available credit.
- Length of Credit History (15%): The longer your positive history, the better your score.
- Credit Mix (10%): Having a variety of credit accounts (e.g., credit cards, loans) helps.
- New Credit (10%): Too many recent applications can lower your score.
The Best Credit Cards to Build Credit: A Comprehensive Guide
Sure you have been looking for the best credit card options to build credit this year, well here is a break down of your best options in this article:
1. Mission Lane Visa Credit Card - Best For No Security Deposit
The mission Lane Visa Credit Card allows individuals with very limited credit begin building credit for the future, and there is no security deposit required. As a cardholder here, you can even check to see if you are prequalified online without a hard inquiry on their credit reports, which can help them gauge their approval odds.
This credit card also comes with automatic credit line reviews, which means those who start with very low credit limit can work toward a higher spending limit with responsible use. As a potential applicant, you should know that this card charges an annual fee of $0 to $59, and you won't know the annual fee you qualify for until after you have applied.
Advantages:
- Easy to qualify for
- Automatic credit line reviews
- Get prequalified online
- No security deposit required
Disadvantages:
- High variable APR
- No rewards for spending
- Annual fee can apply
2. Applied Bank Secured Visa® Gold Preferred® Credit Card- Best For Low APR
Applied Bank Secured Visa® Gold Preferred® Credit Card is secured, meaning you have to put down a refundable cash deposit as collateral. However, the card is easy to be approved for as a result. The good thing too is that it features a low variable annual percentage yield of (APR0 of.
Though this card demands an annual fee, you do not have to go through a credit check to get approved. You can also secure a line of credit between $200 and $5,000 based on your initial security deposit amount.
Advantages
- Low variable APR of
- Reports to the three credit bureaus
- No monthly fees required
- No credit check to apply
Disadvantages
- Minimum security deposit of $200 required
- $30 additional card fee
- No option to upgrade to an unsecured card with responsible use
- Annual fee
- You don't earn rewards
- foreign transaction fee
3. Capital One Quicksilver Secured Cash Rewards Credit Card
You will find several interesting features related to this credit card, including the fact that it offers 1.5% cash back on all purchases with annual fee required. This card is also secured, meaning that you need to put down a deposit (at least $200) as collateral.
Nevertheless, you are able to qualify for a credit limit increase in as little as six months with responsible use, and you may even be asked to upgrade to an unsecured version of the card.
This secured card is geared to individuals with fair credit, so you need to have some credit history and may need a credit score of at least to be approved.
Advantages:
- No hidden fees
- See if you're pre-approved with no impact on your credit
- Automatic credit line reviews in as little as six months
- Annual fee
- Reports to the three credit bureaus
- Earns 1.5% cash back rewards on every purchase
Disadvantages:
- High APR if you carry a balance
- Minimum security deposit of $200 required
- Fair credit required
4. Capital One Platinum Secured Credit Card - Best For Low Security Deposit
The card is appealing because it's designed for individuals working to rebuild their credit. Capital One specifies this credit category as those who have defaulted on multiple loans or faced recent credit card rejections. This criteria makes the card more accessible to applicants.
Another attractive feature is the potentially low initial security deposit, which can be as little as $49, despite offering a minimum credit limit of $200.
Advantages:
- No hidden fees
- Security deposit may be as low as $49
- Check for pre-approval with no impact on your credit
- Reports to the three credit bureaus
- Get approved with poor credit
- Automatic credit line reviews in as little as six months with responsible use
- Annual fee
Disadvantages
- High APR if you carry a balance
- No rewards available
5. First Progress Platinum Elite Mastercard® Secured Credit Card - Best for fast processing
The First Progress Platinum Elite Mastercard® Secured Credit Card stands out for its quick application process, which doesn't require a credit check. The online application takes just minutes, and the bank offers expedited processing to get the card to you faster.
This card is accessible to those with poor credit scores. It requires a refundable security deposit starting at $200. Notably, First Progress states that approval is possible even for those with significant credit issues, including recent bankruptcy discharges.
Advantages:
- Fast and easy approvals and processing
- No credit check required
- No hidden fees
- Reports to the three credit bureaus
Disadvantages:
- Minimum security deposit of $200 required
- $29 annual fee
- High APR if you carry a balance
- No option to upgrade to an unsecured card
- No rewards
6. OpenSky® Secured Visa® Credit Card - Best For No Credit Check
The OpenSky® Secured Visa® Credit Card is notable among credit-building cards for its lack of credit check requirement. This policy contributes to its high average approval rate of 87%, as claimed by the card issuer. A recent addition to its features is the opportunity for cardholders to earn up to 10% cash back when shopping at over 40,000 participating retailers.
As a secured card, it requires an initial refundable deposit of at least $200 to open an account. The OpenSky® Secured Visa® Credit Card aids in credit building by regularly reporting your account activity, including balances and payment history, to the major credit bureaus. This reporting helps establish your credit profile and can contribute to improving your credit score over time.
Advantages:
- No credit check required
- Earn up to 10% cash back on purchases at over 40,000 retailers
- No hidden fees
- Reports to the three credit bureaus
- See if you're pre-approved with no credit score impact
Disadvantages:
- Minimum security deposit of $200 required
- $35 annual fee
- High APR if you carry a balance
- No option to upgrade to an unsecured card over time
- Charges 3% foreign transaction fees
- No rewards
7. Citi® Secured Mastercard® Credit Card - Best For Credit Building
The OpenSky® Secured Visa® Credit Card is notable among credit-building cards for its lack of credit check requirement. This policy contributes to its high average approval rate of 87%, as claimed by the card issuer. A recent addition to its features is the opportunity for cardholders to earn up to 10% cash back when shopping at over 40,000 participating retailers.
As a secured card, it requires an initial refundable deposit of at least $200 to open an account. The OpenSky® Secured Visa® Credit Card aids in credit building by regularly reporting your account activity, including balances and payment history, to the major credit bureaus. This reporting helps establish your credit profile and can contribute to improving your credit score over time.
Advantages:
- No annual fee
- No hidden fees
- Free FICO score each month
- Builds credit by reporting to the three credit bureaus
Disadvantages:
- Minimum security deposit of $200 required
- Variable APR can make carrying a balance costly
- No rewards to earn
How to Choose The Best Credit Card to Build Credit For You
It is quite obvious that the credit-building cards on our list have quite a few overlapping features, but their deposit requirements, fees, and rewards programs vary widely. In order to find the best cards from this list for your personal needs and goals, you need to consider the following tips:
- Consider Fees Carefully
- Decide If you Want to earn rewards
- Choose between secured and unsecured options
- Check for credit-building tools
Final Thoughts: Best Credit Cards to Build Credit
Low credit scores or no credit history can hold you back from reaching your goals. Finding an apartment, buying a house, or even getting approved for loans might be tough without a good credit score. A cosigner can help sometimes, but it's not always an option.
That's where credit-building credit cards come in. While they might not be perfect, these cards can be a starting point to improve your credit score, even if you haven't qualified for other cards.