The Ultimate Guide to Credit Cards
Tuesday, January 25, 2022

5 Ways a Credit Card Can Rebuild Your Credit

Ways A Credit Card Can Rebuild Your Credit

credit card advice

Mike Randall
By: Mike Randall
Updated: May 19, 2020
Advertiser Disclosure

Making a few financial mistakes along your journey to good credit is not uncommon and often repairable, and demonstrating that you can use credit responsibly is one of the ways a credit card can rebuild your credit.

But remember, simply owning a credit card is just one component in your overall credit health. To reestablish yourself as a worthwhile credit risk, there are some factors you need to keep in mind.

A credit card is a tool, and when used properly and responsibly, it can help to show you’re developing good credit habits. Here are some of the ways you can use a credit card to rebuild your credit, as well as six of the best cards for getting started. Our list includes both secured and unsecured cards, and we’ll provide some valuable information to help you decide which type of card may be best suited to your unique financial situation.

1. Pay Your Bills on Time

The single most important factor in calculating your credit score is whether you pay your bills in a timely manner. That’s because 35% of your FICO score is based on your payment history. No other single factor can have as much negative impact on your credit score, as being labeled a late payer.

And it’s not just credit card payments that get reported to the credit bureaus; your cable and cellphone bills, loan payments, even your rent — all of these can have an impact and need to be paid on time.

2. Use 25% or Less of Your Credit Limit

Another factor in rebuilding your score is the total amount of credit you’re using, compared to how much you have available. This factor accounts for 30% of your overall score and can do a lot of damage if it’s too high.

So, how much is too high? Let’s say you have a single card with a $1,000 credit limit. If you owe $800 on that card, it means you have a credit utilization ratio of 80%. Most creditors want to see a utilization ratio closer to 25% or less. That’s because anyone “maxing out” their credit cards may be in financial hardship, and therefore not a good credit risk.

3. Keep Your Old Credit Cards Active

The length of your credit history is also an important component in calculating your FICO score. In fact, credit history makes up 15% of your total credit score. Even if you don’t use that old credit card with its high interest rate and no rewards points, it could still be helping your score.

Keeping it in an active status will make your length of credit history look more attractive, and may also help contribute to your credit utilization ratio.

Some companies will cancel a credit card if it is inactive for too long, so you may want to use the card occasionally and pay it off immediately just to keep the account alive.

4. Have a Healthy Mix of Credit Accounts

Believe it or not, your credit score is also impacted by the types of credit you have. A mix of revolving and installment accounts is more desirable than only having credit cards, and counts for 10% of your total credit score. Adding an installment account, like a car loan or even financing that new TV purchase, will look better to creditors and can help to increase your credit score.

5. Be Mindful of Credit Inquiries

An inquiry is made into your credit history each time you apply for a loan or credit card. If you apply for multiple credit cards or loans in a short period of time, these inquiries or credit checks can negatively impact your FICO score. That’s because to creditors it may seem like you are in desperate need of cash, and therefore are not a good credit risk.

There are two types of credit inquiries — a soft inquiry and a hard inquiry. Soft inquiries are used for things like an employment background check or when you open a cellphone account, and these won’t trigger a hit on your credit score. A hard inquiry is when you apply for a loan or mortgage, or apply for a credit card. These do make it onto your credit report, and too many of them can cause your credit score to drop.

Secured Vs. Unsecured Credit Cards

There are two types of credit cards you can get, and each type can help your credit score if you use it responsibly. A secured credit card is one that uses money you deposit into an account as the available credit line. These are some of the easiest credit cards to get and are usually for people with poor credit or fair credit.

The second type, an unsecured credit card, requires no deposit. This is a true revolving credit account, where the money is lent to you by the issuer and you repay it in increments over time (plus interest of course). Since both secured and unsecured credit card payment information is shared with the credit bureaus, they can both help to rebuild your credit.

3 Best Unsecured Credit Cards for Bad Credit

The upsides to having an unsecured card include no security deposit and perks like cash back or rewards points, depending on the card. The better your credit, the better the rewards card you’ll be approved for. For credit scores above 650, you may benefit from checking out our card reviews for fair creditgood credit, and excellent credit, as these cards offer the best rewards and APRs.

Do your research to find the card that fits your needs. You can start by checking out our top three best unsecured cards for people with bad credit.

PREMIER Bankcard® Mastercard® Credit Card Review

at the issuer'ssecure website

BAD CREDIT RATING

★★★★★
4.7

OVERALL RATING

4.6/5.0
  • Don’t let a low FICO score stop you from applying – we approve applications others may not.
  • You don’t need good credit to apply.
  • Just complete the short application and find out in 60 seconds if you’re approved.
  • When you need assistance our award-winning US-based Customer Service agents are there to help.
  • FICO scores are used to represent the creditworthiness of a person and may be one indicator to the credit type you are eligible for. However, credit score alone does not guarantee or imply approval for any PREMIER Bankcard® product.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
See Issuer Website
See Issuer Website
Fair/Poor
PREMIER Bankcard® Grey Credit Card Review

at the issuer'ssecure website

BAD CREDIT RATING

★★★★★
4.7

OVERALL RATING

4.6/5.0
  • You don’t need good credit to apply.
  • We help people with bad credit, every day.
  • Just complete the short application and find out in 60 seconds if you’re approved.
  • You can build* or rebuild your credit: apply for a PREMIER Bankcard credit card, keep your balance low, and pay all your monthly bills on time.
  • Don’t let a low FICO score stop you from applying – we approve applications others may not.
  • FICO scores are used to represent the creditworthiness of a person and may be one indicator to the credit type you are eligible for. However, credit score alone does not guarantee or imply approval for any PREMIER Bankcard® product.
  • *Build credit by keeping your balance low and paying all your bills on time every month.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
See Issuer Website
See Issuer Website
Fair/Poor
Surge Mastercard® Review

at Celtic Bank'ssecure website

BAD CREDIT RATING

★★★★★
4.6

OVERALL RATING

4.1/5.0
  • Up to $1,000 credit limit doubles up to $2,000! (Simply make your first 6 monthly minimum payments on time)
  • All credit types welcome to apply!
  • Free access to your Vantage 3.0 score From Experian* (When you sign up for e-statements)
  • Initial Credit Limit of $300 – $1,000* (subject to available credit)
  • Monthly reporting to the three major credit bureaus
  • See if you’re Pre-Qualified without impacting your credit score
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
See website for Details
See website for Details
24.99% – 29.99% (Variable)
See website for Details
See website for Details*

+See more unsecured credit cards

3 Best Secured Credit Cards for Bad Credit

In general, a secured card will be easier for people with bad credit to get approved for. If issuers view lending to you as more of a risk, using a secured credit card responsibly is a great way to build your credit and work toward a solid financial history.

Below, our experts have picked out the top three secured credit cards for anyone with bad credit.

SECURED RATING

★★★★★

4.8

OVERALL RATING

4.0/5.0
  • No annual or hidden fees, and you can earn unlimited 1.5% cash back. See if you're approved in seconds
  • Building your credit? Using a card like this responsibly could help
  • Put down a refundable $200 security deposit to get a $200 initial credit line
  • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
  • Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
26.99% (Variable)
$0
Limited, Bad

SECURED RATING

★★★★★

4.7

OVERALL RATING

4.0/5.0
  • No annual or hidden fees. See if you're approved in seconds
  • Building your credit? Using the Capital One Platinum Secured card responsibly could help
  • Put down a refundable security deposit starting at $49 to get a $200 initial credit line
  • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
  • Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
26.99% (Variable)
$0
Limited, Bad
OpenSky® Secured Visa® Credit Card Review

at Capital Bank'ssecure website

SECURED RATING

★★★★★

4.7

OVERALL RATING

3.2/5.0
  • No credit check to apply and find out instantly if you are approved.
  • OpenSky gives everyone an opportunity to improve their credit with an 85% average approval rate for the past 5 years
  • Get considered for a credit line increase after 6 months, with no additional deposit required
  • You could be eligible for the OpenSky Gold Unsecured Card after as few as 6 months
  • Reports to all 3 major credit bureaus monthly, unlike a prepaid or debit card
  • Nearly half of OpenSky cardholders who make on-time payments improve their FICO score 30+ points in the first 3 months
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
17.39% (variable)
$35
Poor

+See more secured credit cards

How You Use the Card Makes the Difference

Keep in mind that credit cards aren’t inherently good or bad — it’s how you use them that makes the difference. Staying mindful about maintaining your budget, making the payments on time, and using your cards responsibly is the key to credit card success. And the more you know about how your score is calculated, the more control you have over your credit.

Advertiser Disclosure

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