One of the worst things about having a bad credit rating or credit history is worrying that you’ll never manage to dig yourself out of the hole. People can have poor credit ratings for many reasons. Sometimes they’re made redundant and they’re unable to service their debts properly, other people may have problems planning ahead, and still others may be just struggling along on a low or sporadic income. All of these situations can lead to a credit history that’s littered with defaults, lingering overdrafts, unpaid bills and late payments. If this is where you are right now, then while it might seem hopeless, you might be able to get help from an unexpected quarter—a credit card. How your credit card can affect your rating Your credit history will have the details of all the different types of financial products you’ve applied for, been approved for and maintained (or not) over the years. It’s not just things like your credit card and loans, though, it’s things like your mobile bill, your utilities and even your insurance premiums that feature on your credit report. Credit cards and loans are among the most important products on your report, however, because they give a stark insight into how you handle lines of credit. Your report will also detail any applications you’ve made for a credit card or a loan. Whether you’re accepted or not, these new loan inquiries will leave a footprint on your history. Related Links – Credit Card Comparison– Do I need financial advice for credit card debt ?– How to choose a family credit card Rejections, or a rash of applications in a short period of time, will ring alarm bells for lenders because they suggest you’re under financial pressure. Having very little credit history at all can also be problematic because lenders have no idea about how you’ll handle any credit they extend to you. It’s important that you have your most recent credit report on hand so you know exactly what you’re dealing with. The ideal scenario is a few well–maintained lines of credit as well as a long history of timely utility and mobile payments. Your credit report will also detail how much of a limit you have so lenders can see how much you already have, as well as whether you pay just the minimum each month or strive to pay more. How to use a credit card to repair your credit score A credit card can have one of the biggest impacts on your credit rating, for good or bad. This is good news for you in a way, because when you’re in a bad (credit) place, the only way is up. By being approved for a new credit card, you can make great strides to rebuild your score. Here’s how you do it Head to a comparison site and look for credit cards for bad credit. Ok there is no credit card advertising themselves as the card for bad credit but they do exist; look for low rate cards and balance transfer cards as it’s among these products that you’re most likely to find your ideal solution. You might see that the maximum limit on these cards is pretty low, or that they don’t have many features. If your application is accepted, take all the restrictions with good grace because this card will help you to improve your score, but only if you: Make your repayments on time, because this shows you’re responsible and have regular income. Pay more than the minimum payment each month (the minimum payment is usually just two per cent of the balance), as this shows that you have good financial understanding and planning. Try to pay the full balance at least some months, as this reduces your interest burden and demonstrates good control and habits. If, after a while of good management, you get a pay rise, ask for a slightly higher credit limit to improve your debt–to–credit ratio, and. Call your card provider once every few months to review your account, to talk about your finances and ask for advice. You should also think about consolidating your debts If a lot of your problems are caused by a number of stubborn credit card debts that you’re struggling to keep under control, then you could think about a balance transfer. Lots of balance transfer cards offer zero interest periods of up to 24 months or more and this means you can really start to tackle your principal balances. If you manage to pay off the entire balance, or almost all, by the end of the interest free period, then you’ll have gone a long way to repairing your rating. If you have a poor credit history If you’re applying for a credit card with a bad history, then you need to remember that lenders will see everything on your report! If your aim is to improve your credit score, then your best options are very basic cards with low credit limits. Be prepared for high interest rates, though. Alternatively, you could look at cards with low or no annual fees and low interest rates. You’ll have to accept low limits at first, but you’re in rehab, so it’s for the best. Low fees, limits and interest will help you to keep the monthly costs down so that you’re less likely to default again. You may need to go back to basics There are a number of basic credit cards on the market, so if you want a low–risk re–entry into the world of credit cards, then starting with something like the ANZ First Card might be a good idea. It has a low annual fee of $30 and basic features, so is easily managed by both newbies and borrowers who had problems and who are looking for rehabilitation. Compare credit cards from Australia’s banks, credit unions and other credit card issuers at InfoChoice. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.