Rebuilding Bad Credit with Credit Cards
- 1). Apply for a traditional credit card targeted toward consumers with a bad credit score. These cards will offer between $300 and $500 of credit. Look for cards with a low annual fee, or no annual fee. All card offers will be high-interest but do not worry too much about that.
- 2). Apply for a secured credit card if you are turned down for a traditional card. When you receive a secured card, you must put down a deposit, usually around $200 to $300. The deposit amount becomes your credit limit. and if you fail to make your payments it will be used to cover your balance. Look for a card that can be converted to an unsecured card after one to two years. Check that the card you choose reports to the three major credit bureaus and watch out for high annual and set-up fees.
- 3). Use your card for a few small, necessary purchases each month. You will rebuild your credit only if there is activity on your account to be reported. Don't use your card to make large purchases or purchases beyond what you can afford. The best credit scores come from using no more than 30 percent of your credit limit.
- 4). Pay your bill in full and on time every month. Failing to pay your bill on time will further hurt your credit. Further, by paying in full every month you avoid the high interest charges that come with carrying a balance.
- 5). Apply for a better credit card after you have been using your card responsibly for one to two years. As you rebuild your credit, you will become eligible for cards with no annual fees, lower interest rates and larger credit limits. As your credit score climbs into the good rating, you will even become eligible for reward cards that will offer you cash back. Just be sure not to overspend as your credit limit increases.
- 6). Keep older card accounts open and active as long as possible because a longer credit history is better for your score. Choose a card that has low, or no, fees to keep open. Keeping a card active will require you to occasionally make purchases with it. As you become eligible for better cards, you may want to close accounts that charge fees, just be sure not to be constantly changing your accounts.
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