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Rebuilding Your Credit: What to Expect from a Credit Card

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The experience of rebuilding credit can be overwhelming at first. Once you learn how to get organized, however, you can accomplish a lot. Getting approved for a credit card while rebuilding your credit brings some extra challenges. There are a few differences in credit cards for people in this situation. It can help to know what to expect if you find yourself in this situation.

Secured Cards

Secured credit cards are a great tool for rebuilding credit. You can often get a secured card, even when you are not approved for regular credit cards. This is because secured credit cards require you to provide your own funds. Your credit score and history is considered when you apply for a secured card, just like any other card. You must then put money on your card. This amount can vary, depending on the state of your credit. A card with a $200 limit many require the entire amount to be provided upfront, or only a percentage. These cards report to the credit bureaus each month, so be sure to keep up with your payments. There is little risk to the card company because the money spent is your own, rather than a line of credit.

High Interest Rates

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You are sure to encounter some high interest rates on credit cards while using credit cards for rebuilding credit. This aspect of credit card use improves as you bring up your score. A rate as high as 21% can occur when your credit score is low. These high rates, however, do not have to impede your progress. Be sure to keep your balance paid off each month, or at least keep it fairly low. By acting responsibly, you are less likely to have large amounts of interest added to your bill.

Regular Reports

You must have positive payment information reported to the credit bureaus for a credit card to help improve your credit score. Make sure that the card you choose reports regularly. While you are working on removing collections and paying off debt, any new cards should be reporting prompt payments. You need open lines of credit to start building the trust of lenders. Start with a secured card if you are unable to be approved for anything else. Make your payments on-time each month to secure your good standing. The resulting reports help your credit score to go up on a regular basis. Revolving credit use with regular payments brings up your credit score faster than any other method.

Credit cards for rebuilding credit often have different regulations than regular credit cards. Secured cards use your own money as collateral to build trust with a bank. These cards a viable option for people with extremely low credit scores. It may be difficult, otherwise, to be approved for a credit card. All cards should report regularly to the credit bureaus. This should always be confirmed prior to choosing a credit card. Credit card use is the best way to build credit, and many are offered specifically for this purpose.