Credit cards and other credit lines can be an important part of your efforts to rebuild credit. The positive payment history is always beneficial, and often the increase in available credit alone can be enough to give your credit score a boost.
There are a few things to consider when using credit cards for rebuilding credit. We'll cover those things here.
The first and most obvious point to consider is which credit bureau or bureaus the card reports to. It is best if the card reports to all three credit bureaus, but depending on your needs a merchandise card that reports to at least one credit bureau can be useful.
It’s important to consider your goals and the limitations of the credit card in regards to reporting. If a card only reports to one bureau and a lender you are applying with checks a different bureau, then the card obviously isn’t going to help you with regards to that loan. It might still help you get pre-approved offers for other (better) cards, but again, it all depends on your specific needs and goals.
The main options when looking for credit cards to rebuild credit are generally:
Each of these options has it’s good points and bad. Again, the important thing is to consider your goals and what approach or mixture of approaches is most likely to meet your needs.
Secured credit cards can be an easy way to get a guaranteed approval, but the size of the credit line is small. If you need to increase your available credit then a secured credit card isn’t going to get you very far. However, many secured credit cards report to all three credit bureaus so they are great for adding positive payment history. Many of them can also be converted to unsecured credit cards down the road, so they can be a useful stepping stone.
Merchandise cards, on the other hand, typically only report to 1 or 2 credit bureaus but often offer much higher credit lines. So you can drastically improve your debt to credit ratio with at least one or two bureaus and open up your chances for more pre-approved credit card offers by making yourself look more attractive to lenders (because you’re using less of your available credit.)
In this article we’ve covered a few basics about using credit cards to rebuild credit. For more information on rebuilding credit, get the Credit Repair Intelligence System by visiting our website at www.CreditRepairPublishing.com.