Using a Credit Card to Rebuild Credit
By: Brian O'Connell

NEW YORK (sbup) — You really can use a credit card to rebuild credit.

After lawsuits and medical bills, credit cards are one of the leading drivers towards bad credit. So it comes as at least somewhat of a surprise that credit cards can help on the back end of all that debt accumulation.

"It might sound a little crazy to suggest you can use a credit card to rebuild your credit history,” Beverly Harzog, a nationally regarded credit card expert, consumer advocate and author of the new book, Confessions Of a Credit Junkie. “But as long as your bad credit problem doesn’t stem from out-of-control spending, a credit card is one of your best tools for getting back into the good graces of the credit gods.”

How so? Herzog offers the following strategies:

Get secured. Harzog advises consumers with bad credit to get back in the game with a secured credit card. “With a secured credit card, you make a deposit into a bank account and that 'secures' the card for you,” she says. “The card issuer gives you a credit card and you use the card just like a regular credit card. It doesn’t say 'secured' on the card, so there’s no stigma attached to it.”

Just make sure you get a secured card that actually reports card payments to credit agencies.

Don’t apply for too many cards. Don’t go into “panic mode” when you mount your good-credit campaign. “People tell themselves tell themselves that they need a lot of new credit cards to prove they’re a good risk,” she says. “This approach often backfires because they don’t have good enough credit to get approved for the cards they’re applying for.”

Herzog says that every time you apply for a credit card, the process dings your credit score by between two and five points.

Don’t overspend with your new card. Harzog advises consumers to get acquainted with an industry measuring tool called a credit utilization ratio. “That is the amount of credit you have used compared to the amount you have available when you add up all of your credit limits,” she says. “The standard advice is to keep your ratio below 30%.

Pay on time — always. Creditors and lenders love consumers who pay their credit card bills on time every month, and so do credit agencies. “Paying your bill off every month makes you look very responsible,” Harzog says. “If you keep your balance low, paying the entire balance shouldn’t be difficult to do.”

Payment history is huge. it represents 35% of your entire FICO credit score, she adds.

Harzog also advises that consumers don’t close unused credit cards. When a consumer closes a card, he or she loses the available credit linked to the card. That affects the credit utilization rate and can knock your credit score down.

Credit cards can ruin — and rebuild — a credit score. Use the tips above to nurture your score back to a healthy level.

—For more ways to save, spend, invest and borrow, visit

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