Secured vs. Unsecured Cards
People with bad credit histories and low credit scores often turn to secured credit cards, which require you to maintain your credit line amount on deposit in a bank account. The deposited funds serve as a guarantee if you fail to make timely payments. An unsecured card designed for persons with bad credit doesn't require money on deposit, but it is more expensive and harder to obtain than a secured card. Unsecured cards often have monthly usage fees, high annual fees, high interest rates and small credit limits.
Rebuilding Your Credit Score
A couple of conditions must apply for you to build your credit score with an unsecured card. First, you must use the card responsibly by not exceeding your credit limit and never missing a payment deadline. Paying off your entire balance each month helps boost your credit score because credit bureaus -- the issuers of credit reports --look at how much of your credit line you actually use. The second necessary condition is to use a card that reports your transactions to all three of the U.S. credit bureaus -- Experian, Equifax and TransUnion. Without such reporting, you won't be able to improve your credit score. You can verify that a card issuer reports transactions before you apply for a card. Over time, credit bureaus will boost the scores of consumers who use credit cards wisely.
Becoming an Authorized User
You might be able to improve your credit score if a primary cardholder makes you an authorized user. This way you can use the credit card without having to make payments -- that responsibility rests solely with the primary cardholder. These cards are usually unsecured and are often used by parents to give their children a means to establish credit. Once again, this strategy only works if both you and the primary cardholder use the card responsibly. In addition, the issuer must report the card activity to the credit bureaus for you to repair your score. The card owner can limit your card spending as an authorized user.
Becoming a Joint Account Holder
When you are the joint account holder of an unsecured credit card, you and the other cardholder are responsible for making minimum payments and observing the credit limit. Spouses often use joint-account cards. This method can help someone with a poor credit score improve her score as long as the card activity is reported and the payments are made on time. Also, unsecured cards used by joint cardholders or authorized users might have much lower fees and interest rates than those issued to someone with poor credit. However, joint cards might have stricter issuance standards that make it difficult for you to be added to the account.