How Can Credit Cards Help Repair Your Credit?

by JT McGee

This guest post was written by Jason Bushey. Jason is a full-time personal finance blogger, and he runs the day to day operations at Creditnet.com.

Repairing your credit over time can be an uphill battle, especially if you’re not sure where to begin. But did you know that there are credit cards specifically designed for consumers hoping to improve their below-average credit score?

Credit cards to repair credit are some of the most powerful devices available to consumers that are ready to get serious about rebuilding their credit profile. Here’s how applying for, receiving and using a new credit card responsibly can boost your credit score, lower your interest rates and work towards getting your credit profile in order.

First, it’s important to consider which credit card to repair credit is right for you. By and large, secured credit cards – credit cards that require a security deposit that guarantees your credit line – are the preferred method when using a bad credit credit card to improve your score. Despite the fact that they require a (fully refundable) deposit up front, secured cards are often a much better deal than their unsecured bad credit competition.

Why? Secured cards don’t carry a ton of fees, their ongoing interest rates are low and they often include helpful credit monitoring tools for cardholders to track their score. These cards also offer high approval rates (not quite 100%, but pretty close), so most bad credit consumers are likely to get approved so long as they can cover the deposit.

Now that you know the type of card to apply for, here’s how to make your card for credit repair work best for you:

1.) Make on-time payments each and every month

This is crucial. The number one way to improve – and derail – your credit score is to make a payment late, or default entirely. In fact, this is how many consumers get into bad credit purgatory in the first place.

According to the inventors of FICO, over 30 percent of your credit score is made up from your payment history. Thus, making on-time payments – and even multiple payments throughout the course of the month – is the most important thing a consumer can do to improve bad credit.

That said, it’s not the only way a bad credit card for credit repair can help.

2.) Pay your balance back in full

There’s a myth that carrying a small balance each month can help your score. This is not true, and in fact it can have the opposite effect on your score if the balance you carry is too high. Why? Because the amounts you owe relative to your total available credit line makes up what is called your “credit utilization ratio”, something that accounts for another 30% of your FICO score.

Essentially, the less you report owing to the major credit bureaus, the better. Plus, you’ll avoid paying anything in interest, while showing credit reporting agencies that you’re finally ready to pay down your balance each month.

And one final way a card for credit repair can help…

3.) Diversify your profile with a new account

New accounts can make up as much as 10 percent of your credit score; applying for and receiving a new credit line (generally) looks good to prospective lenders. Combined with the above factors – expanding your credit line while increasing your payments history – you’ve got a scenario in which responsible use of a secured card can only help your score.

Overall, the best credit cards for credit repair are of the secured variety, but it really depends on you – the cardholder – to make the most of your secured card experiment. Just know that when used properly, a credit repair card can be your first crucial step in the road to credit recovery.

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