Building Credit with a Credit Card?

Answer 1

Having a low credit score can make it difficult or even impossible to obtain financing, and in some cases, it can even keep you from landing a job. Since most lenders are unwilling to extend credit to those with poor scores, rebuilding credit can be a difficult task. No matter what your situation, there are always ways to improve your credit score using credit cards for bad credit.

Finding the Right Card

There are a lot of companies that claim to offer credit cards to people with bad credit. While the offers may seem tempting, there are a lot of things to take into consideration. Most of these companies provide cards with low credit limits. Sometimes the limit is as low as $100. When you sign up, it is likely that you will be changed a sign-up fee and possibly an annual fee. By the time they are done tacking on fees, your shiny new credit card could be maxed out before it even reaches your mailbox. While you should be prepared to pay higher interest rates and fees than someone with good credit, you should not settle for a card that is going to cost you a lot of money before you are even able to use it to make purchases. You should also make sure that you will be able to afford your monthly payments if you plan on using your new card to build your credit score. Institutions like Orchard Bank, Capital One, and First Premier Bank all offer credit cards for bad credit or no credit. Just be careful, though, as your score will determine your initial limit and any fees you will need to pay.

Always make sure to read all the terms and conditions before applying for any credit card.

Secured Credit Cards

If your credit is especially bad, you may not be able to qualify for any reasonably priced unsecured credit cards. If, however, you have a bit of money to spend, you can work on rebuilding your credit using a secured credit card. Secured credit cards are very easy to obtain, and the way they work is similar to a debit card. You have to deposit money into your account, and your "credit limit" is however much is in the account. Unlike debit cards, these accounts report to the major credit bureaus, so they can help you improve your score even when you can't obtain traditional financing.

Using Credit Cards for Bad Credit Responsibly

Rebuilding credit isn't easy. Once you find a credit card, it is necessary to spend responsibly and pay your bill on time each month. It will take some time, but by spending carefully and paying off your debts in a timely manner will work to improve your credit score and make it easier for you to obtain financing in the future.

Don't max out your cards as carrying large balances will actually hurt your score, and try to make more than the minimum payments each month.