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How to repair poor credit history using credit cards

6 ways to improve your credit score with credit cards.

Creditors could consider any credit score below 650-660 as “bad credit” – but you can always improve on that. When used responsibly, a credit card can demonstrate positive financial habits and help rebuild your credit score. Use this guide to understand how a credit card can help you build your credit score.

6 tips to improve your credit score with credit cards

Building your credit score can be a challenge. But it can be done with helpful tools such as a credit-building credit card. If you already have one, you may have to adjust your spending habits. Here are 6 additional tips you can use to rebuild your credit score with a credit cards:

  1. Make payments on time. Your balance payments are included in your credit report, so make this a priority. Consider setting up a reminder or automatic payments.
  2. Dispute any errors you notice in your credit history. Errors happen. But if an error affects your credit score and the ability to get better loan terms, you should fix it. Contact the credit bureau and the organization that gave them your credit information. Tell them which information you believe is inaccurate and include copies of your documents that support your claim.
  3. Check credit utilization. Credit utilization is the ratio of your outstanding credit card balance to your credit limit. Anything below 30% is recommended if you are to improve your credit score. This may be easier said than done, especially if you already have a low credit limit. However, you can improve this by either paying your balance on time or by getting another credit card and using it responsibly.
  4. Treat your credit card as a debit card. Any money you spend that you can’t pay off will add to your balance, increasing your credit utilization and incurring penalty fees and APR. Treat your credit card as a debit card and don’t make any unnecessary purchases.
  5. Keep your existing credit cards open. Closing your credit cards will increase your credit utilization. If it goes beyond 30%, it could have a serious impact on your score. Also, keep in mind the age of your credit card. Closing your oldest account could give lenders the impression that your credit history is too short. However, if you do decide to close a credit card, make sure you already paid off your balance.
  6. Find a credit card that works for you. There’s no one-size-fits-all when it comes to credit cards. But when you’re trying to repair poor credit, your options are often limited to secured credit cards and credit cards for poor credit. Consider which fits your financial needs and consider shooting for a basic, no-frills card to keep things simple as you get back on your feet.

What type of credit card will help build my credit score?

There are a few different credit cards that may help you build your credit:

  • Low-interest rates. You should always aim to pay your balance in full to avoid paying interest. If you think there may be instances when you can’t clear the balance, consider a card that charges low-interest rates.
  • Student credit cards. There are some products designed to suit people, such as students, with limited credit card experience. These cards are often superior to other credit-building cards.
  • Secured credit cards. Secured cards are cost-friendly credit-building options. Most of these cards have either no or low annual fee and some of them even let you earn rewards. However, you must make a secured deposit first.

How secured credit cards can help rebuild credit

A secured credit card acts like a normal credit card, except you have to pay a safety deposit first. Your deposit becomes your credit line. With responsible use, some banks will upgrade you to an unsecured credit card. If you’re building your credit, this may be a good first step toward rebuilding your financial health.

Compare the best credit building cards

Name Product Welcome Offer Rewards Purchase Interest Rate Annual Fee Min. Credit Score Description
Home Trust Secured Visa
N/A
N/A
14.90% - 19.99%
$0
Min. recommended credit score: Any score
Choose from three card options: No Annual Fee ($0 annual fee, 19.99% purchase rate), Low Interest Rate ($59 annual fee, 14.90% purchase rate) or a Low Monthly Fee ($5 monthly fee, 14.90% purchase rate).
Refresh Financial Secured Card
N/A
N/A
17.99%
$12.95
Min. recommended credit score: Any score
Take advantage of a low annual fee, with no credit check and guaranteed approval once you secure your card with some funds.
BMO Preferred Rate Mastercard
3.99% rate on balance transfers for 9 months
N/A
12.99%
$20
Min. recommended credit score: 660
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
Scotiabank Value Visa Card
0.99% rate on balance transfers for 6 months
N/A
12.99%
$29
Min. recommended credit score: 660
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by July 1, 2021.
Scotia Momentum No-Fee Visa Card
Up to 5% cash back
1% cash back
7.99% intro APR for the first 6 months, 19.99% thereafter
$0
Min. recommended credit score: 660
Earn 5% cash back on all purchases for the first 3 months (up to $2,000 in total purchases).Plus, get a 7.99% introductory interest rate on all eligible purchases for the first 6 months. Apply by July 1, 2021.
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How do credit cards affect your credit report?

Your credit report includes details of the financial products you apply for or use over the course of your life. This includes credit cards, loans and mortgages. If you have a credit card, the following details will be included in your credit report. Keep in mind that these are just some of the details listed on your credit history.

  • Application inquiries. Card providers often list your credit card application on your credit report. Several applications for credit in a short time period can hurt your credit score and be a red flag to lenders reviewing your history. However, credit inquiries spread out over time can demonstrate your ability to successfully apply for and manage credit products.
  • Credit limit. When you get a credit card, your credit limit is also listed on your credit report. These details help lenders see how much access you have to credit when considering applications for loans and other products.
  • Monthly repayment history. Your credit history shows if you pay your credit card on time and whether you pay the minimum or full amount each month. This information also gives lenders an idea of your ability to make timely repayments.

Bottom line

You can rebuild your credit using a credit card, but you have to take some steps, including making payments on time, keeping an eye on credit utilization, keeping your existing cards open and adjusting your credit card spending. Learn more about how to rebuild your credit score in our comprehensive guide.

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