Credit Cards

Credit Cards to Rebuild Credit: How to Pick One

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Rebuilding credit can be tough to do. The best way to improve your credit is to open a new account and create a record of timely payments.  Yet, predictably, few banks are willing to grant credit cards to those who have a poor credit history.

You don’t have to give up hope, though, as there are some credit cards out there that are specifically designed for people who are rebuilding their credit.

How to Find the Best Cards to Rebuild Credit

First, applicants need to find the cards for which they are most likely to be approved. The easiest ones to obtain are secured credit cards that require applicants to make a refundable deposit but have few other requirements. Next in line are basic credit cards that are targeted to customers who are rebuilding their credit.

Then, look for a card with the most favorable terms and the lowest fees. There are too many products with excessive fees that are marketed towards those with poor credit, but thankfully there are still a few reasonable cards available. For example, try to avoid cards with no grace period that force you to pay interest on all charges, even when paid in full.

Finally, look for a card issuer that offers a pathway to a more feature filled product. For instance, some secured card issuers invite customers to apply for a standard card after a year of timely payments. Others offer to report payments to all the major credit bureaus, which is a good way to build your score.

Examples of Good Credit Cards for Rebuilding Credit

Capital One Secured MasterCard. This secured card features a reasonable $29 annual fee and will report payments to the major credit bureaus. Cardholders may also receive a credit line increase as their credit improves. This card has a standard interest rate of 22.9% and a 25-day grace period.

First Progress Platinum Prestige MasterCard. This card’s $44 annual fee is a little high, but its 11.99% APR standard interest rate is quite low for a secured card. There is a 25-day grace period for this card. Cardholders must make a deposit of at least $300 but it is held in an interest-bearing account.

Capital One Cash Rewards For Newcomers. Those with few negatives on their credit report but a limited credit history should consider this card. It has no annual fee, but a 24.9% APR standard interest rate. In addition, cardholders earn 2% cash back on travel purchases and 1% back on all other transactions.

At publishing time, Capital One Secured MasterCardFirst Progress Platinum Prestige MasterCard and Capital One Cash Rewards For Newcomers are offered through Credit.com product pages and Credit.com may be compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment.

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  • Marilyn Gertsch

    I would like to know if and when this card will be available in Hawaii? I am a widow, and after my husband’s death due to everything be paid from our savings etc. my credit has gone from excellent to poor. On paper I look bad, but the circumstances definitely have affected me.

    Please let me know if there will ever be a time that this card will be applicable. Also if you know of other cards that are less know. Premier Bank and Capitol One are cards, but their fees are extremely high, and there are fees that add to the expense.

    I would appreciate you letting me know.

    Thank you,

    Marilyn Gertsch

    • psmcbrayer

      Marilyn,
      I would encourage you to apply for a secured credit card at a Federal Credit Union in your area, rather than go through these big impersonal banks. Credit unions offer lower interest rates for lending, are member owned, and non-profit. Earnings from lending activity are returned to the lending pool and the members on a share basis in the form of dividends paid on a quarterly basis, usually. For example, you can get a share secured credit card to build your credit history using money you are already holding in savings anyway. It isn’t money you plan to spend in the near future. Put $1000 on a secured card and use that card always keeping it below 50% utilization, unless you plan to pay the full balance immediately THAT billing period. It will report to the credit bureaus and your credit score will begin to rise at the 6, 12, 18 and 24 month marks. By then, your credit union should offer you an UNSECURED card, or one of the big banks will. Take it, and use it every now and then, and don’t carry a balance.
      Your local credit union has people who can help you build your credit in your own name so that you can achieve your financial goals, like being able to buy a replacement vehicle, purchasing a different home, traveling without having to carry cash or exposing your debit card to fraud activity by using it away from home (credit cards offer more consumer protection in disputes than any debit card does!). Also, you will have a card for emergency repairs, an ER visit, paying a contractor at your home (again, more consumer rights than writing a check). The last time I checked, my federal credit union was offering a small fee for setting up the secured card ($10-25) and 16% interest, adjusted quarterly, based on prime lending rate.

      Be aware that the big banks are adjusting rates MONTHLY in many cases, tied to LIBOR, a calculation based on THEIR prime lending rate and are typically charging 18-29% interest. God forbid you miss a payment…

      I strongly urge everyone to take a really good look at these big banks, their fees, and all that interest. I call it usury when they can borrow from the Fed Bank at less than 2% themselves. I have a bank account, but the majority of my personal assets are in a credit union for all the reasons stated. I am in the same position as Marilyn after a divorce that involved a bankruptcy to protect myself from my ex’s business creditors, not really mine. It is why I now keep myself financially separate from my new spouse; for my benefit and his, since we live in a community property state.

      I wish you the best and just know that special accounts/credit union memberships may be available if your husband worked for the government or was a veteran. You can claim access to those programs as his widow.

      Pamala McBrayer
      BBA Economics, McMurry University, Abilene, TX

  • Michael

    Use Cash!!! Do not use a Credit Card. If you really need a Credit Card, make it a Debit card.

    • Jacqueline Lynn

      But a debit card, like cash, pulls directly and immediately from your account. Nor does it improve your ratings as they do not report your activity.

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  • http://www.credit.com/ Credit.com Credit Experts

    Dianne – Kudos for focusing on improving your credit, it’s a great step in the right direction. To clarify and answer your question, however, transferring credit card debts from one card to another won’t have any impact on your credit scores. This is because your credit scores look at your revolving utilization, or the amount of your credit card balances in relation to the credit limits — and it looks at them individually and on the aggregate level (meaning all credit cards combined). The debt still exists, regardless of which credit card it’s being reported on so moving the debt around really does no good from a credit scoring perspective. To read more about revolving utilization, please see:
    What is Revolving Utilization?
    How Credit Card Balances Impact Your Credit Score

    In the end, it’s best to pay the debt down, or in full if you can, and then focus on using the cards by only charging what you can comfortably afford to pay off in full each month.

    If you’re looking to help in how to go about rebuilding your credit the following educational resources are a great place to start:

    How to Rebuild Your Credit
    
• 5 Things That Affect Your Credit Score
    11 Tips to Rebuild Your Credit

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