How do I Rebuild Damaged Credit & Get a Secured Credit Card/Loan?

Excessive use of credit cards can harm your credit.

Excessive use of credit cards can harm your credit.

Damaged credit can be a major headache that interferes with your ability to get a home or car loan. Your credit can even affect your employment, as employers sometimes check credit scores before making hiring decisions. There's no quick fix for improving your credit, and companies that promise to do so with little more than a push of a button are likely scamming you. With diligent work, though, you can steadily improve your credit.

Check Your Credit Report

You're entitled to an annual free copy of your credit report, and this report can provide you with important clues about how to improve your credit. Focus on unpaid bills and cards with high balances. You may also notice that very old debts are still on your report or that debts are reported inaccurately. If you see an error, dispute the item with the credit reporting bureaus. When you get rid of items that are on your credit report in error, you improve your credit score.

Clean Up Credit Problems

After you've examined your credit report, note the most damaging items. These may include high-balance cards, unpaid debts and charge-offs. Focus on paying these items down first, but avoid making payments on debts that are outside of your state's statute of limitations. This can reset the statute and cause negative items to stay on your credit report longer. If you can't afford to pay the full amounts you owe, contact the lender about a settlement or repayment plan. Note, however, that these plans will be listed on your credit report and can cause your score to drop. The long-term effects, however, can improve your credit as you steadily pay down debt.

Use Credit Wisely

Your debt load plays a significant role in your total credit score, so avoid piling up more debt while you are trying to improve your score. Paying your bills on time is one of the most important things you can do to improve your credit, so get current on outstanding accounts and avoid missing payment deadlines. Repeated applications for new credit can also ding your score, so steer clear of new credit cards and loans until you've cleaned up your credit mess.

Apply for a Secured Card

A secured card can help you rebuild damaged credit, particularly if you maintain a low balance and make timely monthly payments. Most banks and credit unions allow members to use these cards because you'll have to make a deposit that ensures you can't walk away from the balance. Talk to your bank, and compare the interest rates and terms of several different cards. If you use your credit wisely, your bank might graduate you to a credit-building unsecured card.


About the Author

Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.

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