Rebuilding credit can feel overwhelming, but the right tools and habits can make a real difference. IACC experts break down practical, manageable steps to improve your credit score, starting with how to use credit cards wisely.
Written by: Stuart Greenfield, Economics Adjunct Faculty
Throughout their lives, individuals might experience financial events that lead to their credit scores deteriorating. Are there ways to address bad credit? Yes, there are, including a “credit card for bad credit” credit card, which can raise your credit score if used correctly.
The two most important factors that influence your credit score are your payment history and the proportion of your available credit you use. Other factors considered include length of history, new credit inquiries, and the mix of credit accounts.
To restore your credit score, consider obtaining a secured credit card, which requires a refundable cash deposit and typically offers a credit limit based on that deposit. Many banks offer secured credit cards, so check with several to evaluate their fees and terms and ensure that your credit transactions are reported to the three major credit bureaus: Experian, Equifax, and TransUnion.
Since your secured credit card has a low credit limit, use it only for regular transactions, such as gas for your car, small grocery shopping, or monthly expenses like a streaming service or your cell phone bill. Avoid large or impulse purchases, as they might exceed your credit limit and be rejected. You should try to keep your charges under 30-50 percent of your credit limit.
Always pay your full statement balance by the due date. You should consider setting up automatic payment in full from your bank account. An automatic payment will ensure you do not miss a payment, and you will not incur any interest charge on your unpaid balance. The interest rate on secured credit cards is higher than on unsecured credit cards.
Be sure to use services, such as pre‑qualification or “eligibility checkers,” that should assist you in finding a suitable secured credit card. Also, use WalletHub to monitor your progress and ensure that your credit score is improving.
While one would prefer an unsecured credit card, which does not require a deposit, as approval is based primarily on credit history, income, and existing debts. When marketed to people with fair or poor credit, these cards may charge higher interest rates and fees. An unsecured card may also offer higher limits or modest rewards once a person’s profile improves. However, suppose you have experienced delinquencies, collections, or have no prior credit. In that case, an unsecured credit card might be your only alternative.
Tags: ACC Experts, Credit Card, Economics
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