Best Credit Cards to Build Credit of February 2024 - NerdWallet (2024)

FULL LIST OF EDITORIAL PICKS: BEST CREDIT CARDS TO BUILD CREDIT

Chase Freedom Rise℠

Our pick for: No-deposit, no-annual-fee card with rewards

The Chase Freedom Rise℠ is ideal for credit newbies for all the right reasons. It's an unsecured credit card, so there's no upfront deposit needed, nor do you need a credit history to be approved. The annual fee is $0, it earns 1.5% cash back on every purchase, and because it's in the Chase Freedom family of cards, you may eventually have a variety of upgrade options. Read our review.

Chime Secured Credit Builder Visa® Credit Card

Our pick for: Easy account management and guardrails

This card has no minimum deposit requirement, charges neither an annual fee nor interest, and doesn't require a credit check, and you can automate your payments so you're never late. But to get it, you must be a Chime® banking customer, which is an extra hoop to jump through — and which comes with its own considerations when it comes to customer service. Read our review.

Chime says the following:

  • The secured Chime Credit Builder Visa® Credit Card is issued by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your card for its issuing bank.

  • To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

  1. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

  2. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

  3. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

  4. Out of network ATM withdrawal and over the counter advance fees may apply. See here for details: https://www.chime.com/chime-credit-builder-visa-credit-card-agreement/

Discover it® Secured Credit Card

Our pick for: Secured card with a clear upgrade path

Like other secured credit cards for people building or rebuilding credit,the Discover it® Secured Credit Card requires a cash security deposit. Unlike most others,it offers rewards. But what really makes it stand out from the competition is its upgrade possibilities. The issuer has a process in place for automatically reviewing accounts for possible transition to an unsecured card. Read our review.

Capital One Platinum Secured Credit Card

Our pick for: Secured card with deposit flexibility

The Capital One Platinum Secured Credit Card requires a security deposit, as do all secured credit cards. But while most cards require you to put down a deposit equal to your credit line, this one allows some qualifying applicants to get a $200 credit line with a deposit starting at $49. Further, you can be automatically considered for a higher credit line with no additional deposit in as little as six months (see rates and fees). Read our review.

OpenSky® Plus Secured Visa® Credit Card

Our pick for: Secured card with no credit check

Like the regular OpenSky card, the OpenSky® Plus Secured Visa® Credit Card doesn't require a credit check or a bank account. This card, however, charges an annual fee of $0 — at the cost of a higher minimum deposit and a higher interest rate. Read our review.

Petal® 1 "No Annual Fee" Visa® Credit Card

Our pick for: No-deposit card with no annual fee

The issuer of the Petal® 1 "No Annual Fee" Visa® Credit Card doesn’t only rely on credit scores to determine eligibility. Instead, it assesses your creditworthiness based on your income, expenses, savings and debts. The card earns a decent rate of up to 10% cash back when you use the card to shop with select merchants. And there's no annual fee, late fees or foreign transaction fees. (The card is issued by WebBank, Member FDIC.) Read our review.

Prosper® Card

Our pick for: No-deposit card for 'less than perfect credit'

The Prosper® Card doesn't offer rewards, and it charges an annual fee, but the issuer goes out of its way to encourage people with "less than perfect credit" to apply. If you're looking to beef up your credit, it's a decent place to start. Read our review.

Mission Lane Visa® Credit Card

Our pick for: No-deposit option for bad credit

The Mission Lane Visa® Credit Card could be a reasonable option for someone building or rebuilding credit who doesn't want to tie up money in a security deposit. Not everyone will qualify, but the issuer lets you see whether you do before you apply. Read our review.

Upgrade Cash Rewards Visa®

Our pick for: Flexibility for fair credit

The $0-annual-fee Upgrade Cash Rewards Visa® is a cross between a credit card and a personal loan, and it can offer the best of both worlds: flexibility, but with predictable terms from month to month.The card also lets you see what terms you'd qualify for before officially applying. And on top of all that, it earns cash back, too.Read our review.

Discover it® Student Chrome

Our pick for: College student card

Simplicity makes the Discover it® Student Chrome a standout for students searching for their first credit card. You'll earn bonus cash back at restaurants and gas stations with no activation required and no rotating categories to keep track of. Read our review.

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OTHER RESOURCES

What does ‘building credit’ mean?

“Building credit” is the process of establishing a positive credit history, which demonstrates that you can be responsible with borrowed money. The simplest way to track your progress in building credit is by watching your credit score, a number between 300 and 850 that essentially summarizes how you’ve handled credit and debt.

People who are building credit tend to fall into three broad categories:

  • No credit. This indicates an individual who is just starting out with credit. They don’t have any credit history, and therefore they don’t have a credit score.

  • Bad credit. When you have a score, but it’s low — in the 500s and below — that’s generally referred to as bad credit. Some who fall into the “bad credit” category are still new to credit and are working their way up. Others are working to rebuild credit after setbacks such as missed payments, defaults or bankruptcy.

  • Fair credit. Also called “average” credit, fair credit is a score generally in the low to mid-600s. It’s a rung below good credit.

Why build credit? You’ll need decent credit if you ever plan to apply for a mortgage to buy a home, or if you hope to get a car loan with a good interest rate, or if you want to qualify for a great rewards credit card. Employers and landlords frequently run credit checks on applicants, too, so a credit report without many blemishes could help you land a job or get approved for an apartment.

Building credit takes time, though. It’s not something you take care of a week before applying for a mortgage. The time to build strong credit is long before you need strong credit.

A credit card, used responsibly, is generally the fastest and easiest way to build credit. However, many people encounter a catch-22 along the way: They want to get a credit card to build a good credit history, but they discover that they can’t get approved for most credit cards unless they already have a good credit history. The trick to escaping this paradox lies in understanding which cards to apply for.

If you’re just starting out with credit, or if you’re working to rebuild your credit after some setbacks that have dinged your score, you’re not going to get approved for the rich rewards credit cards you see advertised by celebrities on TV. Those cards are for people with good to excellent credit. You can get there, but you’re not there yet. What you need is a card specifically designed for building credit.

What's the best credit card for building credit?

NerdWallet readers regularly ask, “What’s the best credit card?” Our standard answer is that there is no single "best" credit card. There's just the best credit card for you. It’s the card that does the best job of meeting your specific needs as an individual consumer.

That applies just as much with credit cards for building credit as with other cards. The best option depends on your circ*mstances and what "building credit" means to you. Are you starting from scratch, with no credit history whatsoever? Have you begun building credit and are now looking to push your score into the 700s or 800s? Are you looking to bounce back from damaged credit?

Options in credit building credit cards include:

Secured credit cards. These cards require a cash security deposit, which will usually be equal to your credit limit. If you provide a $300 deposit, for example, you'll get a $300 credit limit. The card issuer holds on to the deposit as "insurance" in case you don't pay your bill. That reduces the risk to the card issuer. For that reason, secured cards are among the easiest cards to qualify for. Here are some excellent secured credit cards.

Student credit cards. As the name suggests, these are cards designed specifically for college students. They don't require a security deposit and allow for a more flexible approval process. You may be able to qualify with limited credit history or, in some cases, no credit history at all. Credit card companies see college students as desirable long-term customers, so they target this audience with special products. Here are some excellent cards for students.

Alternative underwriting cards. Most unsecured credit cards — that is, "regular" cards without a security deposit — put a lot of emphasis on your existing credit history when evaluating applications. That's why it's so difficult to qualify for a card when you're just starting out. To address this problem, a number of newer credit card companies use alternative underwriting models. (Underwriting is the process of measuring risk; with credit cards, the risk is that a cardholder won’t pay their bills.) These alternative models can take into consideration things like your job, your education or your non-debt payments instead of just your credit score. Here are some alternative credit card options.

Store credit cards. Cards that you can use at just one store tend to be easier to qualify for than bank cards that you can use anywhere.

Cards for fair or “average” credit. Fair credit is a middle ground. It’s generally defined as credit scores in the low to mid-600s. That’s better than “bad credit,” but still below the “good credit” threshold that’s eligible for most of the best credit card offers. This has traditionally been a poorly served segment of the market, but options have been expanding. Here are some excellent credit cards for fair credit.

Subprime unsecured cards. A whole industry has developed to offer unsecured credit cards to people with bad credit. Although they don’t require a security deposit, cards from so-called subprime specialist issuers are hardly a bargain. They almost uniformly charge high fees — $99 a year is common, and some even charge monthly maintenance fees on top of that. (Unlike a deposit on a secured card, which can be refunded to you, you never get these fees back.) They tend to have low credit limits and high interest rates.

What to look for in a credit card for building credit

Choosing a credit card is about trade-offs. You’re not going to get everything you want in a single card. What’s realistic is to look for a card with the right combination of features that matter the most. Here are some of the most desirable features on cards for building credit.

Credit bureau reporting

Simply put, a credit card will help you build credit only if the activity on that card is reported to the companies that gather the data that goes into credit reports and forms the basis for credit scores. Don’t bother with any card that doesn’t report your payments to credit bureaus.

Prequalification

Applying for any credit card generates a “hard” credit check that will knock points off your credit scores temporarily. If your scores are great, those few points won’t make much of a difference; but if you’re struggling to build credit, it may be a risk you don’t want to take unless you’re sure you’ll be approved. Many companies with credit cards for building credit offer a prequalification process, in which they look at your credit and let you know ahead of time whether you’ll be approved and what kind of offer you qualify for. You can then choose whether to apply, at which point the issuer will usually run the hard check.

A manageable annual fee

Many of the best secured credit cards charge no annual fee at all (although you still must put down a deposit). Some charge an annual fee but offer a compelling feature that might make it worth the cost, such as the ability to qualify with no credit check or an unusually low interest rate. Meanwhile, annual fees are fairly common on unsecured (aka no-deposit) cards for building credit, although you can still find cards in this category without them, particularly if your credit qualifies as “fair” rather than “bad.” Don’t automatically rule out a card with an annual fee, but make sure the fee is one you can manage. Ideally, you won’t be paying the fee very long, because in time you’ll upgrade. Speaking of which …

An upgrade path

A card for building credit is not a long-term proposition. The point is to get the card, use it responsibly to strengthen your credit, then move on to a better card. In the best case, the issuer of your card has better options available in its own portfolio, which would allow you to upgrade while keeping the same account (which can be good for your credit score). If you’ve been carrying a secured card, upgrading with the same issuer allows you to get your deposit back without having to close the account (also good for your score). For example:

  • Capital One offers several cards for bad credit and fair credit as well as popular cards for good-to-excellent credit, so there are plenty of upgrade possibilities.

  • When you have Discover’s secured card, the issuer automatically reviews your account for a potential upgrade to an unsecured card.

Many companies that specialize in cards for building credit don’t have upgrade options, however. That’s not the end of the world. It just means that once your credit improves, you’ll have to open a new card somewhere else. If your first card requires a deposit or charges an annual fee, you’ll have to close that account to get your deposit back or stop paying the fee.

For secured cards: Flexible deposit

Secured credit cards typically have a minimum deposit, and the amount of your deposit determines your credit limit. But pulling together $200 or $300, and then locking up that money in a deposit for a year or more, can be a stretch for some people. Meanwhile, low credit limits can be an issue when you're trying to build credit (see below). Some secured cards offer deposit flexibility, such as:

  • An initial deposit lower than your credit limit.

  • The ability to pay your deposit in installments.

  • The ability to add money to your deposit at any time to get a higher limit.

  • Account reviews that could boost your credit limit without depositing more money.

  • Allowing the money in a linked bank account to act as your deposit.

Free credit score

Multiple card issuers give you free access to a credit score so you can track your progress. This is a nice feature to have, although you can get free credit scores in many places, including from NerdWallet.

Convenient payment options

A key step in building credit — the most important step, really — is paying your bill on time every month. Some cards don’t make that easy, allowing you to pay only by mail and dragging their feet in crediting payments to your account, which can result in late fees and credit score damage. Look for a card that lets you pay online. If you can set up autopay for your bill, even better.

🤓Nerdy Tip

Some credit cards for building credit offer cash back rewards. Getting a little something back for your spending is nice, but don’t get too focused on it. Between the low credit limits typically offered on these cards and the importance of keeping your utilization down (see below), you shouldn’t be doing so much spending that you’re racking up sizable rewards.

Using a credit card to building credit

Once you get a card, use it responsibly to build credit:

  1. Put one or two small purchases on the card each month. The amount you spend should be less than 30% of your card’s credit limit. If you can stay below 10%, that’s even better. A key factor in credit scores is credit utilization, or the amount of your available credit that you’re using. Aim to keep it low.

  2. Pay your bill in full by the due date. Paying on time each month is the single most important thing you can do to build your credit. And when you pay your bill in full each month, you won’t be charged interest. Cards for building credit tend to have high APRs, but if you never incur finance charges, your interest rate doesn’t actually matter. (And no, you do not have to carry a balance from month to month to build credit.)

  3. Keep your eye on your credit score. Over time, your careful credit habits will hopefully be reflected in your scores.

  4. Move up. When your credit improves enough to qualify, call your card issuer and ask about an upgrade. If your issuer doesn’t have upgrade options, look for a card from another issuer.

To view rates and fees of the Blue Cash Everyday® Card from American Express, see this page.

Methodology

NerdWallet's credit cards team selects the best credit cards in each category based on overall consumer value. Factors in our evaluation include fees, promotional and ongoing APRs, and sign-up bonuses; for rewards cards, we consider earning and redemption rates, redemption options and redemption difficulty. A single card is eligible to be chosen as among the "best" in multiple categories. Learn how NerdWallet rates credit cards.

Best Credit Cards to Build Credit of February 2024 - NerdWallet (2024)

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