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Using Credit Cards to Rebuild Your Credit Score

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Building your credit history and improving your credit score can be difficult if lenders aren’t willing to extend you a line of credit. It can be even more difficult to rebuild your credit score if you are recovering from bankruptcy or other unfavorable credit settlements.

I recently received a reader question about using credit cards to improve a bad credit history. Normally I wouldn’t recommend using credit cards if you have a history of bad credit, but there are times when credit cards are actually the best, or only, option to rebuild your credit.

Q Hello, I’m trying to rebuild my credit. Where can I find credit cards to rebuild my credit? Which is the best credit card to do that? I was hoping you might be able to give me some insight as to what I should look for and what I should avoid.

Thanks, James

A Thanks for contacting me, James. The information in this article should answer most of your questions, including how your credit score is determined, how to improve your credit score, how to understand credit card offers, and finally a couple credit card offers that may be beneficial to your situation.

Caveat: You want to avoid credit cards or any products that promise you they will fix your score for you. The only way to improve your score is to make on time payments, reduce your debt to income ratio, and allow time to correct any past mistakes.

Understanding how to improve your credit score

Contrary to the ads you see and hear on TV and the radio, there is no magic bullet to restore your credit score. You can’t pay someone or a company to restore your credit score – it takes time and effort.

The first step to improving your credit score is to understand how how your credit score is determined. These articles will help you with that information:

When you read these articles, you will realize there are many factors that influence your credit score, and that repairing your credit score hinges on a few key factors – mostly making on time payments, reducing the amount of debt you owe, and doing this over time. The more time you put between any blemishes on your score, the larger the impact on your credit score. To put it simply, it takes time to improve your score.

Using Secured Credit Cards to Improve your Credit

Secured credit cards look and act like regular credit cards, but there is one major difference. You have to maintain a deposit with a bank in order to use a secured credit card. The deposit acts as collateral in the event you don’t make your payment. Your credit limit is usually around 50% – 100% of the balance you keep with the bank.

The good news is that you will be able to improve your credit score with a secured credit card so long as you make regular payments and don’t go over the limits. The downside to using secured credit cards is leaving a deposit with the bank, annual fees, and relatively high interest rates (which you can avoid by making on time payments).

An added benefit to secured credit cards is that many of them offer guaranteed approval, regardless or credit history, credit scores, or other negative marks.

Understanding credit card offers

Not all credit card offers are created equally and there are several factors to consider when applying for a new credit card. You should look at interest rates, rewards, sign up deals, introductory rates, balance transfer offers, fees, and other factors. Here is more information about understanding credit card offers.

Best credit cards offers

These articles give you a couple credit card offers that may be beneficial for you (rewards cards, balance transfer offers, and credit card bonuses):

No credit card can improve your credit score by itself

Remember, no credit card can improve your credit score by itself. It takes good credit practices such as making on time payments, reducing your debt to income ratio, the type of credit you have, and time.


Published or updated August 27, 2010.
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{ 4 comments… read them below or add one }

1 Mark Buckley

Good article. There is no magic bullet .. . . just basic principles to live by. Spend less than you earn and work on building a 6 month cushion to cover living expenses should you lose your job. Everyone’s focus should be on earning steady income and living within one’s means. Too many, unfortunately, are trying to “trick” the system into artificially pumping up credit scores.

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2 kevin

Hi, I have a question…..I have spent the last few years paying ALL of my debt………….I have no debt right now……..but also I have no credit history according to the credit companies…..so what am I supposed to do now? I cannot get a card to start showing on time payments…which is what I want……I am looking at these cards for bad credit and they look like a huge nightmare……I am on disability……..I am 54..I live in a home that is payed for and all I do is help with the bills…but none of the bills are in my name…..so I basically have no way of trying to rebuild my score..at least that I know of? do you have any ideas that I can check on? Thanks Kevin

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3 Ryan

Kevin, Congratulations for getting out of debt. That is a great accomplishment and one of the smartest financial moves you can ever make. You still have options for building credit history. For example, a secured credit card is a good way to get a line of credit without risking additional debt. Basically, you send the credit card company a secured line, make charges, then pay off your card. For example, if you had a $500 line of credit, you would need to deposit $500 with the credit card company. That way they don’t risk losing any money. As you make your payments, you build credit. There are some fees involved with these lines of credit, but they will allow you to build your credit history and build a credit score. After time, you can apply to have your secure card changed into an unsecured card, meaning you don’t need to leave money on deposit.

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4 Rob C

Considering the credit card companies have almost instant access to your bank information as well as outstanding debt on every card you should focus on improving debt to income ratios. In this credit environment a high credit score with no money in the bank is just as easily a zero score.

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