How to Rebuild Your Credit With Credit Cards

When you have had some credit problems and your score is low, you can use your credit cards to help rebuild your credit. It may sound strange, but keeping your credit card accounts open and using them regularly can have a positive effect on your credit score. You just need to understand what goes into your score and how proper credit card use can boost it.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Credit Cards

1. Leave your credit card accounts open. Bankrate says it can hurt your credit score to close existing credit card accounts. Leave them all open while you are trying to rebuild your credit, particularly if there is no annual fee. You may have to make one small purchase every six months to keep the issuer from closing the account.

2. Make small purchases with your credit cards that can easily be paid off. According to the Privacy Rights Clearinghouse, the amounts you owe count for 30 percent of your FICO credit score. Keep the balances manageable.

3. Pay your credit cards on time. Your payment history counts for the largest part of your FICO credit score (35 percent). Your credit cards can help you rebuild your credit by giving you the opportunity to show that you can make the payments as scheduled, without skipping one or making any late payments.

4. Avoid opening new credit card accounts. Focus on using the cards you already have to rebuild your credit. If you have bad credit that needs rebuilding, you will have a difficult time qualifying for new accounts. If you fill out numerous credit card applications, it will actually hurt your credit because these inquiries reduce your score.

5. Call the issuers of your highest limit credit cards and ask them to lower the limits. According to the Experian credit reporting bureau, credit cards can harm your credit score if you have too many that have either large balances owed or high credit limits. This action will avoid the harm to your score that would be caused by closing high limit accounts altogether.

Tips & Warnings

• When you are using credit cards to rebuild your credit, be sure that your payment information is being reported accurately. You are entitled to a free copy of your credit report from the three major bureaus every 12 months. Request your report and make sure that your on-time payment information is correct. If it is not, or if you find any other erroneous negative information about your credit cards, file a dispute.

References

• Privacy Rights Clearinghouse information
• Experian credit score information
• Bankrate information

Who Can Help Sponsored

• A Bad Credit Score is 598 or Below. Checking your own Credit Report won't affect your score! See instantly for $0 by Experian® www.FreeCreditReport.com