A credit card can help you rebuild your credit score. This card will help your ratio of available credit to debt and you can build a positive payment history.
However you will only qualify for a sub prime credit card if you have a damaged credit score. This means your card will have an interest rate around 19%.
You should still make efforts to remove derogatory items off your credit report. However it is rumored that once a derogatory item ages four years it will not impact your score as dramatically.
On your card you will have to pay an annual fee and a high interest rate. Unfortunately this is an unavoidable cost, however with proper use you can ensure this is the last time you will have to pay high interest rates.
On your card you will be given a credit line of $300. Your other choice is to get a secured credit card.
A secured card you will have to put a deposit down and the amount of your deposit is the credit line on your card. This card will report to the credit bureaus however it will not give you the same benefit as an unsecured card.
With an unsecured card it will be instant approval and your payments and balance will be reported to all major credit bureaus. It is important to double check and make sure your credit card will report to all three credit bureaus.
In addition your credit will get the most benefit if you can keep your monthly balance at 10% of your credit limit. For example if your credit limit is $300 then you want your monthly balance to be $30.
This will help because it shows; you use your credit, and use it responsibly. In addition having available credit will increase your available credit to debt ratio, this shows the bureaus that you are not in over your head.
There is one other option that we strongly discourage and that is a shopping or catalog card. This is a credit card that is only able to make purchases through a catalog or a website online. We discourage this option because there is often a large down payment required and the card typically only reports to one credit bureau.
A prepaid card is another option. This is a good choice if you are unable to open a checking account because this card will work just like a bank account.
In sum we suggest you open a sub prime credit card for your credit score to get the most benefit. This card will help improve your score by creating a positive payment history and improving your ratio of debt to available credit.
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