Using a Credit Card to Help Build Credit

How to Find a Credit Card That Can Help Repair Bad Credit

Sep 7, 2009 Carol Finch

Bad credit can make it hard to get new credit. Getting lenders to approve future lending may mean cleaning up records by finding products that show responsible behaviour.

If previous financial problems have given an individual negatives on their credit rating then they may find it extremely difficult to borrow money in the future. Lenders look at credit histories to see patterns of behaviour and negative actions can see them turn down applications or charge higher interest rates. Given that some negatives on a record can stay there for up to six years it can take a lot of time to put things right.

Ironically, one of the most effective ways to improve a credit record is to show responsible borrowing. If an individual can take out a new financial product and meet their repayment obligations on time as they should then this sends a positive message to future lenders. They will, quite simply, be able to see this good behaviour just as they can see the bad. One of the easiest ways to do this is to use a credit card account.

How Can a Credit Card Build Credit?

If a consumer can get a new credit card account then they can use it to show responsible financial management. Every payment that they make on their card will show up on their credit record. So, if they make payments when they are supposed to, every time they are supposed to, then they will start to show signs of better financial management.

This may not completely outweigh any negatives that they have on their accounts. They will still be there. But, they could show some positives in return. In many cases people who have had financial problems in the past have now dealt with their problems and may be back on their feet again. This could simply make them look like a better prospect to lenders.

How to Get a Credit Card With Bad Credit

The problem that many people will come across here is actually getting approval for a credit card with a less than pristine track record. This may not be the time to look at standard card products. A consumer that makes an application and gets turned down after a credit check could make their track record look worse. Products designed for people who have a bad credit history may be the only way to go for some.

The good news is that many larger (and more reputable) lenders are looking at ways of helping people in this situation. There are consequently more products in the sector that could help consumers to repair their credit rating. Some will also not even require a credit check.

Things to Consider Before Applying for a Bad Credit Credit Card

Before taking this route it may be wise to consider the whole picture. There are negatives to taking out these kinds of products. For a start they will invariably come with very high interest rates. For this reason it is not a good idea to use this kind of credit card if the individual is not 100% sure that they can/will repay their balance in full every month to avoid interest being added. Using a credit card rate comparison site can be a good way of finding the lowest rates.

Some lenders may also put restrictions on who they will give cards to. Even though these products are designed for people with credit issues, some lenders will not give them out to people with certain problems such as a past bankruptcy or IVA proceeding. It is vital to check first before making an application to see if any terms or conditions such as these may apply.

The copyright of the article Using a Credit Card to Help Build Credit in Personal Budgeting/Finance is owned by Carol Finch. Permission to republish Using a Credit Card to Help Build Credit in print or online must be granted by the author in writing.