Reader Question: How do I rebuild my credit?

We received the following question from Salena in Sunnyvale, CA this morning:

My husband and I are trying to rebuild our credit. The problem is we have bad credit, so no one will give us any new accounts. Do you have any suggestions for us? This is just as bad as having no credit!! Please help!

Isn't it an odd Catch-22 that you seem to need good credit in order to establish your credit! Luckily, this isn't entirely true. The trick is to apply for a credit card that is designed specifically for borrowers with bad credit. These cards have higher rates and fees but can be immensely helpful in improving your scores. You can search for these credit card offers here by looking for "bad credit OK" under the "credit needed" category.  You can also consider opening a secured credit card instead.

Avoid applying for the "bad credit" offers that arrive in the mail. These accounts are usually very expensive compared to online credit cards and loans. Plus, you may waste your time applying and not being accepted for these supposedly targeted offers. There is a big difference between "pre-approved" and "actually approved" for borrowers who have bad credit.

Once you open your new account, be sure to use it responsibly every month and pay the bill on time. As your credit score improves, you'll start receiving offers for new accounts in the mail. Once your score is in the high 600-700 range, you should probably open a new credit card with better terms and close the first expensive account. In most cases, you don't want to close old accounts because it can cause a drop in your credit score. If this first account has an annual fee, it makes sense to close it despite the credit score damage.

You can read more about how to establish credit without actually establishing credit in a previous post by our credit score expert, John Ulzheimer.

Do you have a question for our credit experts? Send us an email!

Comments

[zhafran]

First for repairing your credit you have to come out with the exact ideas of the resources that can help you in repayment of loan. For offering a sold solution to this problem some have come out with credit repairing kit in market that can help you as per your requirement. Regarding that facility to repair your credit various libraries are playing a great to make the people sensitive to bad credit loan and remove the fear they have for taking loan with bad credit. As it is almost unknown to the people so there are also availability of copy or fax machines in case you need to copy any information or guide and to consult with your lenders. The guide kits include some specific instruction by which you can make your next steps in this process of repairing your credit.
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