Building a strong credit score is a critical component of financial health in North America. Credit scores influence everything from securing loans and mortgages to getting favorable interest rates on financing. One of the most effective ways to build and improve your credit score is by using credit cards wisely. In this article, we will explore how some of the best credit card issuers in the U.S. and Canada can help consumers build their credit scores, focusing on their offerings and strategies to maximize your credit-building efforts.
Table of Contents
- Understanding Credit Scores
- How Credit Cards Help Build Credit Scores
- Best Credit Card Issuers in North America for Building Credit
- United States
- Canada
- Factors That Impact Your Credit Score
- Tips for Using Credit Cards to Build Credit
- Conclusion
Understanding Credit Scores
A credit score is a numerical representation of an individual’s creditworthiness, typically ranging from 300 to 850. It is calculated based on several factors, such as your payment history, credit utilization, length of credit history, types of credit used, and recent credit inquiries. A good credit score opens doors to lower-interest loans, better credit card offers, and even job opportunities.
The three major credit bureaus—Experian, TransUnion, and Equifax—calculate credit scores using slightly different models, but the FICO score (used primarily in the U.S.) is the most widely accepted.
How Credit Cards Help Build Credit Scores
Credit cards are one of the best tools for building credit, provided they are used responsibly. When used properly, credit cards can positively influence the following aspects of your credit score:
- Payment History (35% of your score): Timely payments show lenders that you are a reliable borrower. Regularly making on-time payments is the most significant factor in improving your credit score.
- Credit Utilization (30% of your score): This refers to the percentage of your available credit that you use. A lower credit utilization ratio (ideally under 30%) helps improve your score.
- Length of Credit History (15% of your score): The longer your credit history, the better. Using a credit card for an extended period helps build a positive credit history.
- Credit Mix (10% of your score): Having a variety of credit types (credit cards, loans, etc.) can boost your score, demonstrating that you can manage multiple credit accounts responsibly.
- New Credit (10% of your score): Opening several new credit accounts in a short period can lower your score, as it suggests you may be overextending yourself.
Best Credit Card Issuers in North America for Building Credit
Both U.S. and Canadian card issuers offer a wide range of credit cards designed to help consumers build or improve their credit scores. Whether you’re a newcomer to credit or looking to rebuild, here are some of the best options available:
United States
- Capital One
- Capital One Platinum Credit Card: This card is ideal for those with fair or average credit. It offers no annual fee and an opportunity for a higher credit limit after making timely payments. It helps consumers build their credit by reporting to all three major credit bureaus.
- Capital One QuicksilverOne Cash Rewards Credit Card: Perfect for individuals with average credit, this card allows users to earn 1.5% cash back on every purchase while providing an opportunity to raise credit limits with responsible use.
- Discover
- Discover it® Secured Credit Card: For those just starting to build credit or recovering from a low score, this secured card offers 2% cash back on up to $1,000 spent at restaurants and gas stations, plus 1% on all other purchases. Discover matches all the cash back earned in the first year, helping consumers quickly grow their savings.
- Discover it® Student Cash Back: A great option for students, this card helps build credit by offering 5% cash back in rotating categories and 1% on other purchases, with no annual fee and a chance for credit limit increases.
- American Express
- Blue Cash Everyday® Card from American Express: This is a great card for building credit with no annual fee and cashback rewards. It offers 3% cash back on U.S. supermarkets (up to $6,000 annually), making it a valuable tool for those looking to build credit while earning rewards.
- American Express® Green Card: For those with fair credit, the Green Card offers a straightforward way to earn points on travel and everyday spending, with no foreign transaction fees and an opportunity to improve credit scores through responsible use.
- Discover it® Secured Credit Card
- This is one of the best cards for those with poor or limited credit. It requires a deposit but offers significant rewards, including 2% cash back on dining and gas, and the opportunity to upgrade to an unsecured card after a period of responsible use.
Canada
- RBC (Royal Bank of Canada)
- RBC Avion Visa Infinite Card: This card offers premium travel rewards and is suitable for individuals with strong credit scores looking to build further. RBC also offers secured credit cards that are ideal for those starting to build or rebuild their credit.
- RBC Rewards+ Visa Card: A great choice for those who are new to credit, offering rewards on everyday purchases and no annual fee for the first year.
- Scotiabank
- Scotia Momentum® Visa Infinite Card: While this is a high-tier card, it offers excellent cashback rewards and a chance to improve your credit score for individuals with average or good credit scores. Scotiabank also offers secured cards for those with limited credit history.
- Scotiabank Value® Visa Card: This card is perfect for those who want to avoid high fees and is a good starting point for building credit. It offers 1% cashback on every purchase, and it’s ideal for newcomers to Canada or those rebuilding their credit.
- BMO (Bank of Montreal)
- BMO CashBack® Mastercard®: With no annual fee, this card allows individuals to earn cashback on every purchase, with a higher rate for grocery spending. It’s a great option for newcomers to credit or those rebuilding their scores.
- BMO® World Elite® Mastercard®: This premium card is suited for consumers looking to improve their credit while earning rewards for travel, with benefits like comprehensive travel insurance.
- TD Bank
- TD Cash Back Visa Infinite Card: For those with good credit, this card provides cash back on purchases and comes with travel perks. TD also offers a secured card to help individuals with lower scores build their credit over time.
- TD Rewards Visa Card: Ideal for newcomers or those with average credit, offering points on purchases that can be redeemed for travel or other rewards.
Factors That Impact Your Credit Score
To make the most of your credit card, it’s essential to understand what factors contribute to your credit score:
- Payment History (35%): Always pay your credit card bill on time to avoid late payment penalties and negative impacts on your credit score.
- Credit Utilization (30%): Use less than 30% of your available credit to maintain a healthy credit utilization ratio.
- Length of Credit History (15%): Avoid closing old accounts, as the length of your credit history is a positive factor.
- Credit Mix (10%): Having a variety of credit accounts (credit cards, loans) can improve your score.
- Recent Credit Inquiries (10%): Limit the number of credit card applications to avoid multiple inquiries, which can lower your score.
Tips for Using Credit Cards to Build Credit
- Pay On Time: Timely payments are the most important factor in improving your credit score. Set up reminders or automatic payments to ensure you never miss a due date.
- Keep Balances Low: Avoid maxing out your credit limit. Aim for a credit utilization rate below 30%.
- Avoid Applying for Multiple Cards: Too many applications in a short time can harm your score. Focus on using one or two cards and managing them well.
- Check Your Credit Regularly: Monitoring your credit score can help you spot any inaccuracies or fraud early on, allowing you to take action before it impacts your credit.
Conclusion
Building a strong credit score is essential for financial success, and using credit cards responsibly is one of the most effective ways to achieve this. In North America, the best credit card issuers—whether in the U.S. or Canada—offer a variety of cards designed to help consumers build or improve their credit scores. By choosing the right card and using it wisely, you can lay the foundation for a solid financial future.
