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Credit Cards for Rebuilding Credit

Michelle Brooks

Michelle Brooks

Financial Advisor

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Finding the best credit card for yourself is one of the most important parts of rebuilding your credit. If you’ve had credit problems in the past, you might find that it can be extremely stressful when you begin applying for credit based products. This can be a nightmare for various reasons — your credit score impacts your ability to get leases, loans, phone plans, credit cards, and plenty of other much needed items. There are a few ways you can begin to rebuild your credit. One way many Americans do it is to be added onto a family members credit card as an ‘authorized user’ — which can help give you some of their good credit history.

It is important to note that you should only do this if your family member has great credit — you don’t want to inherit a bad credit history! But this isn’t an option for everyone — don’t worry, you can get credit cards that can help you rebuild your credit score. Some of these come in the form of credit cards with little credit requirements, and others come in the form of secured credit cards which require down payments prior to receiving credit. You should view these as a tool to help you rebuild for your future, it’s a great way to learn to get back on the credit ladder prior to getting a more substantial credit limit.

This article will help outline the various factors you should consider when deciding what credit card to use to rebuild your credit. In addition, it will consider the benefits and disadvantages of obtaining these cards. Make sure that you choose the best ‘rebuild’ credit card on the market when you decide to apply for one – you should always be looking for the best deal possible when it comes to obtaining a credit card.

What to Look For

When considering which card to opt for when rebuilding credit, you should consider the following factors: type of credit card, reputation of lender, and interest rate.

  • Type of Credit Card – There are actually two types of credit cards available to those who want to start rebuilding their credit. The first is a regular credit card with low credit score requirements, this means that despite your poor credit history, you may still be able to receive this card. The other type of credit card is a secured credit card in which you deposit the amount of money equal to your credit limit into an account so your lender has collateral against your credit use. This is a great way to start using a credit card without having to worry about your ability to pay it back, if you can’t pay it back, then your deposit will be used to cover the money owed.
  • Reputation of Lender – You don’t want to get duped into using a dodgy lender because you lack a credit score. Many predatory lenders are looking for people new to the credit card industry to whom they can charge fees and other charges to – don’t get trapped by a lesser known lender, try and stick with major banks and lenders! It looks better for your credit report, too.
  • Interest Rate – This is primarily applicable to regular credit cards not secured credits cards as secured cards can always be paid off using their deposit. If you’re using a regular credit card, you’ll want to make sure that the interest rate is as low as possible. Because you’re trying to rebuild your credit, you don’t want to get stuck in a debt trap that you can’t get out of.

 

Advantages

The main advantage of these types of cards is the ability to rebuild your own credit. You need to have credit to do various things in life and this is the perfect way to get the ball rolling. In addition, the secured card option means that you won’t have to worry about not being able to pay your bill as you have collateral in place should a hardship arise.

 

Disadvantages

The primary disadvantage lies in the fact that you won’t receive a large limit, and you won’t receive many additional benefits for using your card. In fact, if you use a secured card, you will be tying up money in an account to help ensure you can pay your bill – this means that you get no real monetary benefit from having your card.

 

Other Benefits of Credit Cards for Rebuilding Credit

As mentioned previously, you won’t receive many additional benefits for getting a ‘rebuild credit’ credit card. But there are some hidden perks in many credit cards that you might not be aware of. If you’re trying to assess which is the best card for you, it’s important to see if you can snag some of these extra benefits.

Many basic credit cards will include zero-liability policies, which mean that you cannot be held responsible for any charges that are not your doing. This is a great benefit that doesn’t come with many debit cards, which means that credit cards are much safer to shop with, especially online. Make sure that you don’t get a card without this feature, it is pretty standard across credit cards.

Other benefits to look out for when trying to find the best credit card to rebuild with include extended warranty cover and purchase insurance. Some basic credit cards will give you extended warranties on certain products that you purchase – some are even up to double the normal warranty that comes with the product you purchase. In the rare case, some cards will include purchase insurance that covers certain items that you purchase with your credit card. Make sure to keep your eye out for these types of cards!

Tips and Tricks for Applying

If you’re trying to rebuild credit, it’s very important that you approach the application process seriously. You don’t want to end up damaging your credit by being irresponsible with your applications. Check out some of the tips we suggest below to make sure that you get the most out of your application.

 

Check Your Credit

You should start your application process by checking your credit report. Never apply for a credit card without being aware of your credit score. Doing so leaves you open to getting rejected and further damaging your score.

Aside from checking your score, you should make sure that all the information on your credit report is accurate. There is a massive problem with misreporting in the United States, millions of Americans have removable items on their credit reports. If you’ve only ever looked at your score, but never done an in-depth look at your report, you might find that your score is low because of an item that shouldn’t be present.

Request a credit report from Experian, Equifax, or TransUnion. All three of these reporting bodies are required by law to give you a free report at least once a year – take advantage of this legal benefit. If there’s a problem, either write to them to have it removed, or employ a credit repair company to help you get the items taken off.

 

Make Sure Your Eligible

Once you’ve checked your credit score, it’s time to make sure that you’re eligible for the card that you’re applying for. Many issuers will suggest the type of score range that you should have should you want to acquire the card. If you can’t find this, then you’ll want to check various credit card forums to see which kind of scores applicants were successful with. Many individuals will put down the scores that they receive approvals or rejections with.

If you’re drastically ineligible to apply for a card because of your credit score, look for another card. There’s no point in applying and getting rejected for a credit card for no reason, it will only further damage your ability to get a different card in the future.

 

Check Alternate Rules

Your credit score and credit report are the most important factors behind any credit card application. But some lenders will have their own rules as well. Many credit card issuers won’t accept anyone who has applied for more than five credit cards in 24 months – this is true even if you have a very high credit score.

Make sure that you check that lenders don’t have independent rules prior to applying for one of their cards. You don’t want to make a credit card application that results in an inquiry on your report, especially if there is no way that you will be able to acquire the card because of an issuer stipulation.

 

Choose One Card at a Time

As a credit rebuilder, it’s very important that you only apply for one card at a time. Your poor credit history dictates that you can’t afford to make multiple inquiries. In addition, if you apply for multiple cards at the same time, credit companies will view this as suspicious. They don’t want to take on clients that appear to be extremely desperate for cash – it leaves them open to too much risk.

The reality is that many people make the mistake of applying for many cards at once to increase their chances of approval. Doing so only puts you in a worse position. If you get rejected for a card and you don’t have a solid credit history, you might want to wait up to a month to apply for a new card. That’s why it’s important to research the exact card you want to apply for prior to submitting any applications. Choose the one that you are most likely to be approved for – employ a risk minimization strategy when you apply for a card.

 

Do You Have Any Special Circumstances?

If you’re having to rebuild credit, it’s often because you have made a mistake in the past. This might mean that you fall into a category that allows you to obtain a credit card much easier than a traditional applicant. For example, college students can obtain credit cards with less than stellar credit histories. Lenders are aware that students will have limited income, so they offer low-limit cards to help you rebuild your score.

 

Co-Signing

Sometimes the best option is to try and find a card that will allow you to co-sign it. In traditional lending, many lenders will allow people to have someone co-sign a loan or mortgage. This is done to allow someone with poor or limited credit history the opportunity to get a loan. The co-signer will be responsible for paying the loan should you end up defaulting on it. For this reason, you should be careful in making sure that you are able to meet the debt requirements – you don’t want to end up damaging your co-signers credit rating.

 

Verdict

If you need to rebuild credit for the future, you should start doing so straight away. Using a credit card that allows for credit rebuilding is probably the best possible way to get yourself back on the right track. You need to make sure to search for the best possible credit rebuilding credit card on the market. You should always be seeking the option that is a good fit for your circumstances.

These types of credit cards are some of the hardest types of credit card to find. Because you want to be fairly certain you can obtain the card before you apply, it can be difficult to determine which one is best for you. We’ve done extensive research to compile a list of the best credit cards for rebuilding – the full list is available right here on our website. You can click through directly to the application portal via our website.

Rebuilding your credit doesn’t have to be impossible, just make sure to take on some of the advice we’ve gone over on this page prior to applying. You can greatly increase your chances of being approved by simply taking a few easy steps. As always, avoid high interest cards and be responsible with your spending to ensure you don’t have future problems.