How can people improve their credit scores using a credit card for bad credit?

Reprinted from WalletHub published on August 18 by By: John Kiernan

How can people improve their credit scores using a credit card for bad credit?

The most important thing to understand is that a credit card for someone with bad credit should be viewed as a tool for rebuilding credit, not as additional money to spend. The goal is to establish a consistent record of responsible borrowing.

Start by using the card for a small amount of routine spending each month, perhaps gasoline or a recurring bill, and then pay the balance in full and on time. Payment history is an important component of a credit score, so avoiding late payments is critical. I would strongly recommend setting up automatic payments as a safeguard. As my father taught me, use credit cards, but pay them off every month without an interest charge.

Consumers should also pay attention to credit utilization. Just because a card has a $1,000 limit does not mean you should carry a balance anywhere close to $1,000. Keeping balances low relative to the credit limit demonstrates that you are not dependent on borrowed money. Ideally, pay the balance in full each month rather than carrying debt and paying interest.

Finally, rebuilding credit takes time. There really is no shortcut. A pattern of small purchases, low balances, and on-time payments month after month can gradually demonstrate responsible credit behavior and improve a person’s credit profile.

How should people decide between a secured and an unsecured credit card for bad credit?

For someone rebuilding credit, I would focus less on whether the card is secured or unsecured and more on the total cost, terms, and how the card will be used. Again, focus on paying it off every month, without paying interest.

A secured credit card requires a refundable deposit that generally serves as collateral and often determines the credit limit. That may be a very good option for someone who cannot qualify for a reasonably priced unsecured card. The deposit also creates a natural limit on borrowing.

An unsecured card does not require that upfront deposit, which sounds more attractive, but cards marketed to consumers with poor credit can sometimes come with higher interest rates, annual fees, or other charges. Consumers should carefully compare those costs rather than assuming an unsecured card is automatically the better choice.

Most importantly, make sure the card issuer reports payment activity to the major credit bureaus. If the purpose of the card is to rebuild credit, you want your responsible payment history to be reflected in your credit reports.

My advice is simple: choose the least expensive reputable card you can qualify for, use it sparingly, pay it in full every month, and think of it as a temporary bridge toward stronger credit and better financial options in the future.

Dr. J. David Chapman is Professor of Real Estate and Finance and serves as Chair of the Department of Finance at the University of Central Oklahoma. He is the author of subURBAN! Reimagining the Suburban Downtown and writes a weekly real estate column, Lot Lines, for The Journal Record.

Dr. Chapman is the founder of Realty1 LLC, an innovative real estate firm. He currently serves as a Real Estate Commissioner with the Oklahoma Real Estate Commission and Director on the Regional Transportation Authority. He also represented Edmond as the Ward 1 City Councilman from 2019 to 2023, where he chaired the Edmond Mobility Commission responsible for public transportation, such as Citylink and RTA.

Dr. Chapman’s research focuses on urban resilience and counterterrorism in built environments, dense urban districts, and crowded public spaces. His scholarship has been featured in peer-reviewed journals and presented at conferences across the country.

He holds a PhD from Oklahoma State University, a Master’s Certificate in Real Estate and Construction Management from the University of Denver, an MBA from Embry-Riddle Aeronautical University, and a Bachelor of Science in Mechanical Engineering Technology from Oklahoma State University. In addition, he is licensed by the FAA as a Commercial Pilot, Certified Flight Instructor, and Airframe & Powerplant Mechanic.