How to use a Visa Credit Card to Rebuild Credit

visa-credit-card-rebuild-credit

Among the many credit-building tools to re-establish a good credit history, using a Visa credit card to rebuild is the quickest and most straightforward tool.

You build your credit score by adding positive information to your credit reports and opening a Visa card has the potential to immediately increase your credit score as soon as it starts reporting.

If you find yourself in the position of rebuilding credit that means some mistakes have been made in the past. Rebuilding credit means you’ll have to better manage credit to avoid snafus that may lead you back to credit troubles.

The most important fact about credit scores is that a Visa credit card payment activity and credit utilization will be reported to the credit bureaus. This will have the most impact on credit scores.

That means not one payment can be missed as well as using as little of your available credit as possible in order to rebuild your credit.

How to use a Visa credit card to rebuild credit

1. Always pay on time.

Payment history is the biggest factor in your credit score – that means all payments must be made on time. The more on-time payments you have, the more your credit score will improve. Spiraling late payments is a sure way to ruin your credit score. A single 30-day late or missed payment may harm credit scores up to 100 points. Even making a partial payment can be reported as a late payment.

Remember, late payments won’t end up on your credit reports for at least 30 days after the date you miss the payment. That means if you make the full late payment before that 30-days is up, creditors will not report it to the credit bureaus as a late payment. Your scores can recover from late payments but it takes some work.

2. Maintain low credit card balances.

Credit card utilization is the next biggest factor in your credit score. That means account balances must be low in comparison to your credit limit. Carrying a high balance on a credit card can hurt your score.

Remember, experts advise keeping your usage below 30% of your limit — both on individual cards and across all your cards. But FICO also says people with the highest credit scores are held by those who keep credit card usage to 10% or less of their available credit limit.

3. Promptly pay off the bill each month.

The use of credit cards is just like borrowing money. Never borrow more than you can afford to pay each month. The best practice when using a visa credit card to rebuild credit is to promptly pay off the bill each month. Don’t even carry a balance. That way you won’t have to worry about maintaining a low credit utilization rate.

A simple way to pay in full each month is to only use the Visa card for small purchases.

4. Make frequent payments.

If you do use your credit card for larger purchases make small payments throughout the month to keep your credit card balance low. Multiple payments throughout the month decrease your credit utilization. A maxed-out credit card looks irresponsible to lenders. Carrying a high balance on a credit card hurts your score.

Making frequent payments will help eat away at your balance quickly. Once you’ve paid down the balance and your credit reports update, your credit scores won’t be impacted by a high balance.

3 Visa credit cards to rebuild credit

When rebuilding credit, you should avoid applying for credit cards that you will not qualify for. Look for cards that are designed for people with poor credit. Secured credit cards should be considered as well as unsecured credit cards for bad credit.

1. X1 Credit Card – Unsecured Credit Card

X1 Credit Card is a no credit check visa that offers consumers the chance to get a credit limit based on their income, not their credit score.

Card Features

  • Credit limits are based on current and future income.
  • Cardholders will earn a flat 2 points per dollar on every purchase.
  • Cardholders that spend more than $15,000 in a year will earn 3 points for every dollar you spend during the year.
  • Credit limits will automatically increase over time.
  • To manually increase your credit limit you can link your bank account and provide pay stubs.
  • No late fees.

2. Self Visa® Credit Card – Secured Credit Card

Open a Self account and pay the $9 administrative fee. Self’s bank partner will lend you funds to put into a certificate of deposit (CD), and you can’t access the money until the CD matures. Make your next three monthly payments on time. Once you’ve accumulated at least $100 in savings and your account is in good standing, you’re eligible to open the Self Visa® Credit Card.

Card Features

  • Use your savings progress to secure your Self Visa® Credit Card.
  • $300 credit limit (subject to available credit).
  • When you pay off your credit-builder loan, you’ll receive your principal back minus fees and interest.
  • You don’t need a credit score.
  • No hard inquiry.
  • Fund your secured-card deposit with your credit-builder loan.

3. OpenSky® Secured Visa® Credit Card

No credit check necessary to apply. OpenSky believes in giving an opportunity to everyone.

Card Features

  • Build credit quickly. OpenSky reports to all 3 major credit bureaus.
  • 99% of our customers who started without a credit score earned a credit score record with the credit bureaus in as little as 6 months.
  • OpenSky provides credit tips and a dedicated credit education page on our website to support you along the way.
  • The refundable* deposit you provide becomes your credit line limit on your Visa card. Choose it yourself, from as low as $200.
  • *View our Cardholder Agreement located at the bottom of the application page for details of the card

Visa credit cards to rebuild credit can assist consumers from all walks of life. If managed correctly you will find your credit scores improving.

These types of cards don’t have to be permanent in your credit profile. After several months of on-time payments, you will likely be able to upgrade your credit cards to ones with better rates and rewards.