How to Repair a Bad Credit Score with the Right Credit Card

How to Repair a Bad Credit Score with the Right Credit Card

Given that your credit score impacts every aspect of your life, building a good credit history is extremely essential. If you have had a bad history in the past, one of the best strategies to repair a bad credit score is to get a credit card and use it responsibly. Read ahead for information about the best credit cards you can use.

Are you concerned about the pre-qualification checks?

Many credit card companies conduct pre-qualification checks free of cost. Their inquiries will remain on your credit report for only a short time. For this reason, they are called “soft” inquiries. “Hard” inquiries are made when you apply for a new credit card or loan and affect your credit rating. Getting pre-qualification is a smart move if you’re concerned about a possible rejection or hard inquiry showing up on your credit history.

Strategies for applying for a credit card for users with bad or poor credit

Although this may seem like conflicting advice, getting a credit card can actually help improve your credit scores. Remember, the credit score is a summary of all your “good” and “bad” credit activities. Choose from secured or unsecured credit cards and use these strategies.

Find out your credit score

According to the regulations of the Federal Trade Commission, you are entitled to one free credit report every 12 months from each of three credit reporting organizations, TransUnion, Experian, and Equifax. Contact these bureaus.

Study the report when you receive it carefully and identify the areas that you need to fix. For instance, if you regularly fall behind making payments towards utilities or rent, you may want to set up reminders or auto-payments. By understanding the factors that are bringing down your credit score, you can make changes to improve the rating.

Explore your options between a credit card and a short-term loan for bad credit

Depending on your circumstances, in place of a credit card, you can also choose to take a short-term loan. Look for a reputable lender who is willing to make you a short-term loan at reasonable rates of interest. Not only can the loan give you some extra spending money, but you can also pay it back on time and earn a positive notation on your credit score.

Get protection from identity thefts

To repair a bad credit score, and protect it from possible identity thefts and the fallouts that come with it, you can sign up for a Credit Monitoring Service. These services are economical and will alert you to any suspicious activity in your credit score.

Choose the right credit card

When choosing a credit card, check the application process for the possibility of a hard inquiry that can adversely affect your ratings. Also, keep in mind that if you have a low credit score, the issuing company may not offer you perks like reward points, cash-back facilities, or travel benefits.

Consider opting for a prepaid debit card

The prepaid debit card is issued by top companies against a balance that you’ve deposited in advance. You can now continue to use the card just as you would a credit card. Try working with this option if you don’t have a bank account and can’t get an unsecured credit card. However, you should use this card only for a short while. Since no credit is extended to you, debit cards don’t help build a credit score and you may need to pay various fees for their use.

Consider using a secured credit card for a limited time

If a low credit score does not allow you to qualify for an unsecured credit card, opt for the secured credit card. As you continue to make full payments before the due date, you can eventually get back your deposit and repair a bad credit score. Once your credit report improves, the issuing company may offer you an upgrade to an unsecured card that also includes a rewards program. Check our list of secured cards for good options.

Other smart habits

  • Honor bills and payments on time every month, never delay payments or miss due dates
  • Pay off the minimum or complete balance every month, never allow a high balance to add up or remain on the card
  • Use the credit card sparingly, avoid maxing out the card
  • Never cross the limit on the card
  • Clear the due payments on all previous credit cards you own
  • Get all errors on the credit report corrected by disputing them
  • Build a long credit history

Understanding secured and unsecured cards

You can choose between two kinds of cards, secured credit cards, and unsecured credit cards.

Secured credit cards

Secured credit cards are ideal for people who have a limited or negative credit report. To get this card, you must put down a cash security deposit that acts as collateral for the card. Typically, the limit on the card is equivalent to the cash you’ve deposited. Accordingly, if you’ve deposited $500, your card will carry a $500 limit.

Such cards lower the risk factor of the card for the issuing company because they can use the cash deposit if you cannot honor payments. By using the card responsibly and making regular payments, you can repair a bad credit score and qualify for a regular credit card in the future.

Unsecured credit cards

Most conventional credit cards are unsecured. The card issuing company allows you the card on the basis of a good credit history that demonstrates you will honor payments. Such cards typically carry lower fees and other upfront charges.

Since applications are approved on the basis of your credit score, you will not be asked to put down a cash deposit as collateral. Getting unsecured credit cards without a good credit report can be difficult and you may be asked to pay additional charges or higher rates of interest.

Best credit cards that can help you repair a bad credit score

If you’re looking for the best credit card that can help you rebuild your credit score, check out the comprehensive list below that includes both, secured and unsecured cards. Do keep in mind, that issuing companies introduce and discontinue specific cards all the time. To assist you, we will be updating this page regularly.

All our suggestions are based on the APR, Annual Fee, and Credit Reporting for each card. All of these factors are likely to weigh heavily on your choice as a user with not-so-perfect credit scores. You could also consider getting:

  • Initial Credit Limit
  • Ease of Qualification
  • Deposit Requirement
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