Credit Card to Help Rebuild Credit

Having bad credit is not in and of itself a bar to getting a credit card. However, if you don't learn how to use a credit card responsibly, no credit card will help your credit score. Consumers who want to improve their credit need to understand how credit scores are calculated and how to use a credit card to raise their scores.

Credit Scores

Your credit score is based on your past activity as a credit user and calculated by various companies that use different formulas to arrive at a score. In general, scores are calculated by weighing five main factors -- credit payment history, average length of each credit instrument, the varieties of credit used, the number of new accounts and the amount of available credit utilized. Any card that allows you to positively change any of these factors will help you raise your score.

Credit Cards

Whenever you apply for or use a credit card, this gets recorded on your credit report and impacts your credit score. To build your score, you have to pay your bills on time, keep the amount you carry as a balance on your card low, not have a lot of open accounts or new accounts, and keep your cards for a long time. Contrary to what many people believe, you cannot generally raise your credit score by canceling credit cards, unless you have more cards and debt than you can manage.

Secured Credit Cards

For people with very bad credit, the only kind of card they can often get is a secured credit card. Unlike most credit cards, which are unsecured, a secured credit card requires a user to pay a security deposit or post some other form of collateral. If the user is then unable to repay the debt, the credit card company can repossess the collateral.

Card Use

No matter what kind of credit card you have, the activity you take with your credit card is far more important that the card itself. In addition to paying all bills on time, a wise consumer uses less than about 30 percent of each of his credit cards' available credit limit. This keeps your available credit utilization low and shows you don't use your cards too much. Also, you shouldn't rely on only one form of credit.