Getting a credit card to help rebuild your credit history is a very wise decision. A credit card can help you create a positive payment history.
When you have a damaged score you will be faced with a sub prime interest rate. This means you 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.
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.
You credit limit will be approximately $300. The other option is to get a secured credit card, however your credit score will not receive the same benefit.
A secured card works like this; you deposit money into a bank account with the credit card issuer and they give you a credit card with the amount of your deposit as your credit limit. Your card will work just like an unsecured card; you will have monthly due dates and minimums to pay.
Both of these cards offer online approval. However before you apply for any card double check and make sure that card does report monthly to all three 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.
The other alternative for a credit card is a shopping card. This card is only accepted through a designated catalog or through a website. These cards often only report to one credit bureau and have large fees.
A prepaid debit card is another option. We suggest this option to individuals in chexsystems because it will work just like a bank account.
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.