You can use a credit card to help rebuild your credit score. This card will help you build a positive payment history and will improve your ratio of available credit to debt; both these factors are heavily weighed in your credit score.
This is how you will build positive credit to your damaged score. Unfortunately because of your low score you will have to pay higher interest rates.
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.
If your credit score is low you will still be able to qualify for a sub prime credit card. This means you will pay approximately 19% APR and an annual fee.
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.
Both these types of cards offer instant approval. Before you apply for any card double check and make sure that they 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 shows the credit bureaus that you do have available credit; this is called your available credit to debt ratio. In addition it shows the bureaus that you do use your credit.
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.
You also can apply for a prepaid credit card however these cards typically do not report to a credit agency. However they do work like a bank account and if you are in chexsystems this is a good choice.
In sum we suggest a sub prime unsecured credit card to help rebuild your credit score. It will create a positive payment history and build positive credit.
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