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.
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. If you aren’t sure where you stand on your credit, get a free FICO score with no credit card required so you can get a benchmark for where you are with your credit.
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):
- Zero Percent Balance Transfer Credit Card Offers.
- Credit Card Referral Bonuses.
- Gas Rewards Credit Cards.
- 0% APR Credit Cards.
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.