How to Build My Bad Credit With a Credit Card

Build your credit using a credit card responsibly.

Good credit is important when you want to get a good interest rate when you take out a loan. Not only can bad credit prevent you from getting a car loan or a mortgage, it can also prevent you from getting a good job, a cell phone or decent insurance rates. If your credit is bad, while you may not be able to improve your score right away, you will be able to improve your score over time by taking the right steps.

Instructions

1. Check your credit report at all three credit-reporting agencies: Equifax, Experian and TransUnion. Often, mistakes are on the reports that will make your score appear lower than what it should be. If you find a mistake, send a letter to the credit reporting agency with proof of the mistake and ask that it be fixed.

2. Set up an automatic payment plan to pay your credit card or use a reminder system so that you will not have any late payments. Paying your bills consistently on time is an important way to raise your credit score.

3. Only use 30 percent or less of your available credit on your credit card. Maxing out credit cards will lower your credit score. To get the best scores, the best plan is to use only 10 percent of your available credit, according to MSN Money. Using only 10 percent to 30 percent of your available credit also helps you from getting in over your head with debt.

4. Pay your bills in full each month. You do not have to carry a balance to raise your credit score. Showing that you are paying your bills on time is what is important. Paying your bill off each month will also save you money on interest charges.

5. Get added to someone else's credit card as a joint account holder. If you get on your father's card, for example, his credit record can be imported to your credit file. You should only do this if your father has a good credit history. In addition, as soon as you are added to the card, you will be responsible for any debt on the card. It is difficult to get your name removed once it has been put on, according to MSN Money.

6. Get a department store or a gas card. While bank cards will help raise your credit the most, if you cannot get a bank credit card, department store or gas cards will help raise your credit somewhat.

7. Use your credit card regularly for at least six months. If you simply get a card and never use it, your issuer could cancel the card.

Tips & Warnings

• If you cannot get a credit card, apply for a secured credit card. This card requires you to deposit money with the lender. The amount you deposit becomes your credit limit.

• Check with your credit union when looking for a secured credit card.

• Be careful when choosing a lender to open a secured credit card. Many unscrupulous lenders charge outrageously high annual fees and interest rates.

References

• MSN Money: 9 Ways to Build Credit from Scratch; Liz Pulliam Weston
• Federal Trade Commission: Building a Better Credit Report