Building Credit with Credit Cards for Bad Credit
Nobody wants to deal with repairing damaged credit, but the truth is many of us are just one serious illness or job loss away from a credit nightmare. And while it can take years of responsible credit management to build great FICO scores, it unfortunately takes just a few missed credit card payments to inflict major damage on your credit history. The good news is that bad credit isn't a permanent thing. No matter how bad your credit scores are, they can always get better! Time, in conjunction with responsible use of credit cards for poor credit, can heal all credit wounds. Here are 3 tips to keep in mind as you choose a bad credit credit card and begin your journey back to excellent credit:
Unsecured vs. Secured Credit Cards?: Both types of credit cards will help you build credit, but secured credit cards require a deposit as collateral for your account. If you want to take the safe route, choose a secured credit card. However, if you're committed to always paying your balances in full and on time, unsecured credit cards will help you build your credit scores just as fast as secured credit cards.
Keep Credit Utilization Low: Credit cards for bad credit often have low credit limits. Since credit utilization is a very important factor in determining your FICO scores, make sure you keep balances at 30% or less of your available credit. If you can manage to keep your credit utilization at 10% or less, that's even better. Your FICO scores will love you!
- Upgrade to a Fair Credit Credit Card: Credit cards for bad credit aren't meant to be used forever. They're a stepping stone on your journey back to good credit. In fact, after 6 to 12 months of responsible use, you should be able to upgrade to a better credit card for fair credit with rewards and lower fees.