8 Ways Credit Cards Can Help You Rebuild Your Credit

If your credit score is low, getting a credit card for rebuilding your credit may be your first challenge. But there are options. And, once in hand, you can use that card to work toward rebuilding your credit.

For people with low credit scores, there are credit cards designed to help build credit from scratch. They might not come with any bells and whistles, but they can be good starting points. But if your credit score is 500 or less, you may need to enlist a cosigner or apply for a secured credit card. Secured cards require a refundable security deposit, which becomes your credit limit. You’re sort of borrowing from yourself, but consistent charging and making payments on time show that you’re financially responsible and begin to rebuild your score.

If you’re getting your first credit card, you might be able to find one with a 0% introductory annual percentage rate (APR). This can help you avoid the potential perils of accrued interest, if only for a few months.

To rebuild your credit, you must use credit. But credit cards also make it easy to overextend yourself. Creating a budget and using your credit card only for purchases you can afford can help you rebuild your credit while avoiding debt.

Payment history is a major component of your credit score. To help you make credit card payments on time, most issuers offer text or email reminders, and some let you enroll in automatic payments. But it’s still a good practice to make sure those automatic payments are going through, according to the U.S. Consumer Financial Protection Bureau (CFPB).¹ And if you send your bill payments by snail mail, be sure to send them a few days before they’re due to ensure they arrive on time.

Paying your credit card balances in full each month prevents interest or finance charges from accruing. But there’s more it can do: Paying in full can also help you rebuild your credit score. This is because your credit utilization ratio – your credit card balance as a percentage of your credit limit – affects your credit score.

Keeping your credit utilization ratio below 10% – in addition to paying bills on time – can benefit your FICO score.² But if you make many large purchases or if your credit limit is particularly low, you could still end up with a high utilization ratio during some parts of the month. So, some people pay their bill twice a month instead of monthly to keep that ratio low.

Applying for too much at once can lower your score. This applies to getting a new card to transfer balances at a lower interest rate and to opening a new store card account to get a discount, the CFPB notes.

The age of your credit card accounts also affects your credit score. The longer your credit history, the more predictable your debt and credit management is to lenders.

Rebuilding your credit isn’t an overnight process. It can take several years to raise your credit score. And if you’ve made credit mistakes – missed payments or maintained delinquent accounts – it can take anywhere from 7 to 10 years before your credit report absolves you of all those mistakes. Consistent, responsible credit card use can be key to rebuilding your credit.

Thirty-four percent of consumers who participated in Consumer Reports’ 2021 Credit Checkup survey found at least one error on their credit report.³ About 80% who filed disputes were able to get their reports modified. You can get one free yearly credit report from each of the three main credit bureaus: Equifax, Experian, and TransUnion. Keep a keen eye out for errors, such as unauthorized inquiries into your credit or accounts you didn’t open.