How to Use a Credit Card to Rebuild Credit

Using a credit card to rebuild credit seems like a confusing proposition. Most likely a credit card helped contribute to your credit score falling in the first place. However, a credit card can actually help you get back on the right track if you use it properly. A credit card is simply a tool. If it gets you into trouble, it is no one's fault other than yours. Therefore, if you use the tool properly, it can get your credit score going back in the right direction. Here are a few ways that a credit card can help you rebuild your credit.

Regular Payments

The biggest way that a credit card can help you build credit is through regular payments. When you make a regular payment, this looks very favorably on you with the credit bureaus. Credit cards report to all of the major credit bureaus. Therefore, whatever you do with them will become common knowledge very quickly.

Your payment history makes up about 35% of your credit score. Therefore, you can see how greatly your credit score can be affected just by paying your bills on time. As soon as you get your statement, pay it immediately if you can. If not, at least make sure to get it there by the due date. Paying your bills on time, will help you rebuild your credit score faster than anything else you can do. The longer you pay your bills consistently, the better your score will be. If you can't pay off the entire balance or a large percentage of it, at least make your minimum payment each month. The minimum payment is usually affordable as long as you don't have too big of a balance.

Watch Balances

Another thing that credit bureaus like to look at is the balances that you keep on your card. If you always have a maxed out card, it will reflect poorly on your credit report. This will make it look like you don't know how to handle your money and it's out of control. If possible, try and keep your balances down to a level of about 30% of the credit limit. If you can keep it at 30% or less, the credit bureaus will believe that you know how to handle your money and bump up your scores accordingly.

Length of Time

Another way that a credit card can help you rebuild your credit is if you have the credit card for an extended period of time. One of the factors in determining a credit score is the length of time that you've had the credit. If you have had the card for a long time, it will reflect positively on you. They deduct points if you open an account and close it quickly. The longer you have been doing business successfully with a particular company, the better it will reflect on your credit score.


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