5 Ways a Credit Card Can Rebuild Your Credit (Aug. 2024)
Updated:
Writer: Mike Randall
Mike Randall,
Mike Randall is an expert in the areas of credit scores and credit cards, having written on those topics for national publications for more than a decade. He graduated from California State University with a degree in English literature, and he has an extensive background in personal finance studies.
Aside from credit cards and scores, Mike enjoys writing about changes in the subprime market and how they directly impact financial decisions.
Lillian Guevara-Castro brings more than 30 years of editing and journalism experience to the CardRates team. She has worked at The Atlanta Journal and Constitution, Gwinnett Daily News, Gainesville Sun, and The New York Times, where she covered demographics, consumer issues, and the business and financial sectors. Lillian has a degree in journalism and communications from Georgia State University and brings her fact-checking expertise to ensure Digital Brands content is accurate and engaging.
Ashley Fricker has more than a decade of experience as a finance contributor and editor, and has specialized in the credit card industry since 2015. Her credit card commentary is featured on national media outlets that include CNBC, MarketWatch, Investopedia, and Reader's Digest, among many others. She has worked closely with the world’s largest banks and financial institutions, up-and-coming fintech companies, and press and news outlets to curate comprehensive content and media. Ashley holds a bachelor's degree in multimedia journalism from Florida Atlantic University.
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 credit, good 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.
Our in-house experts rate credit cards for bad credit based on:
The regular APR
Annual and other fees
Ease of approval
Rewards offered
Credit bureau reporting
Educational resources offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate credit cards for bad credit based on:
The regular APR
Annual and other fees
Ease of approval
Rewards offered
Credit bureau reporting
Educational resources offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
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Our in-house experts rate credit cards for bad credit based on:
The regular APR
Annual and other fees
Ease of approval
Rewards offered
Credit bureau reporting
Educational resources offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate credit cards for bad credit based on:
The regular APR
Annual and other fees
Ease of approval
Rewards offered
Credit bureau reporting
Educational resources offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate credit cards for bad credit based on:
The regular APR
Annual and other fees
Ease of approval
Rewards offered
Credit bureau reporting
Educational resources offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate credit cards for bad credit based on:
The regular APR
Annual and other fees
Ease of approval
Rewards offered
Credit bureau reporting
Educational resources offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Adjustable credit limit based on what you transfer from your Chime Checking account to the secured deposit account
No interest* or annual fees
Chime Checking Account and qualifying direct deposit of $200 or more required to apply. See official application, terms, and details link below.
The secured Chime Credit Builder Visa® Card is issued by The Bankcorp Bank, N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
*Out-of-network ATM withdrawal and OTC advance fees may apply. ViewThe Bancorp agreement orStride agreementfor details; see back of card for issuer.
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.
Our in-house experts rate Secured Credit Cards based on:
Deposit amounts
Annual and other fees
The regular APR
Ease of approval
Rewards offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate Secured Credit Cards based on:
Deposit amounts
Annual and other fees
The regular APR
Ease of approval
Rewards offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Adjustable credit limit based on what you transfer from your Chime Checking account to the secured deposit account
No interest* or annual fees
Chime Checking Account and qualifying direct deposit of $200 or more required to apply. See official application, terms, and details link below.
The secured Chime Credit Builder Visa® Card is issued by The Bankcorp Bank, N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
*Out-of-network ATM withdrawal and OTC advance fees may apply. ViewThe Bancorp agreement orStride agreementfor details; see back of card for issuer.
Our in-house experts rate Secured Credit Cards based on:
Deposit amounts
Annual and other fees
The regular APR
Ease of approval
Rewards offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate Secured Credit Cards based on:
Deposit amounts
Annual and other fees
The regular APR
Ease of approval
Rewards offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate Secured Credit Cards based on:
Deposit amounts
Annual and other fees
The regular APR
Ease of approval
Rewards offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
Our in-house experts rate Secured Credit Cards based on:
Deposit amounts
Annual and other fees
The regular APR
Ease of approval
Rewards offered
Issuer reputation
We also consider other cardholder needs and data points specific to the category. We then compare it to similar card offers and evaluate the terms before assigning a numerical value, in which 5.0 represents the best. Ratings are updated as issuer changes occur, and issuers have no influence on our ratings.
No Annual Fee, earn cash back, and build your credit history.
Your secured credit card requires a refundable security deposit, and your credit line will equal your deposit amount, starting at $200. Bank information must be provided when submitting your deposit.
Automatic reviews starting at 7 months to see if we can transition you to an unsecured line of credit and return your deposit.
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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.
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