Getting a Credit Card to Rebuild Credit

If you are recovering from debt troubles, consider getting a credit card to rebuild credit.

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If you are trying to improve your credit after it's taken a hit, consider getting a credit card. By using a credit card to make small purchases and paying the credit card account in full each month, you can start to build up positive credit history. But it's not always easy to get a credit card if your current credit file is weak. Here's how to get a credit card when you've had bad credit in the past.

Explore Other Options Before Getting a Credit Card

Often, getting a new credit card is not the best way to begin your quest to improve credit. Before you start searching for a credit card, explore other things you can do to improve your credit. To learn how, see the articles on Rebuilding Credit Without Getting New Credit. Only get a credit card when you are truly ready.

Get a Department Store or Gas Station Credit Card

It’s often easiest to get a credit card from a department store or gasoline company. These companies usually open your account with a very low credit line. If you start with one credit card, charge items, and pay the bill on time, other companies will be more likely to issue a card to you.

When you use department store and gasoline cards, don’t carry a balance from one month to the next. There are several reasons why carrying a balance is not a good idea:

  • The interest rate on these cards can be very high.
  • Because the credit limits tend to be very low, if you carry a balance, the percentage of the credit limit you have used will be high. This will lower your credit score.
  • Carrying a small balance suggests to potential creditors that you are not able to manage even small amounts of credit.

Apply for a Regular Credit Card

After you have successfully used a store or gasoline credit card for several months to a year, then you may be able to apply for a regular credit card from a credit union or bank, such as a Visa, MasterCard, or Discover card. (To get the best deal, see Shopping for Credit Cards.)

Depending on how bad your credit history is, you may be eligible only for a low credit line or a card with a high interest rate. If you use the card and make your payments, after a year or so you can apply to increase your line of credit or reduce the interest rate.

Tips to Help You Get a Credit Card

The following tips will help increase your likelihood of being approved for a new credit card or an increased credit limit:

  • Use the same format for your name every time. Don't use your middle initial once, and then not again. The same goes for Jr. and Sr. -- either use it all the time or never.  
  • Present yourself in a sympathetic light.  Lenders are especially apt to ignore past credit problems that were out of your control -- such as those caused by a job layoff or illness. But make sure you are honest when you present your story.
  • Bolster your credit application. Don’t lie, but don’t denigrate yourself, either. For example, if you’re an administrative assistant, don’t put “clerk/typist” for your job title. Also, if you are married and your spouse has excellent credit, apply jointly or at least indicate on the credit application that you are married.
  • Choose your timing. Apply for credit when you are likely to get it. For example, apply when you are working, when you’ve lived at the same address for at least a year, and when you don’t have an unusually high number of inquiries on your credit report.
  • Apply for credit from creditors with whom you’ve done business. For example, your phone company, insurance company, or bank may offer Visas or Master Cards to their customers.

If You Can't Get a Regular Credit Card:  Secured Cards

If you can't get a credit card, you can try to get a secured credit card. Secured cards are easier to get, although often end up being more expensive. To learn more, see Getting a Secured Credit Card.

To learn more about credit reports and rebuilding credit, visit our Credit Repair area.

This is an excerpt from Credit Repair, by Margaret Reiter and Robin Leonard (Nolo).

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