Debt Free? Now it’s Time to Improve Your Credit

by Ryan Yates

Getting out of debt is a fight, no question about it. You scratch and you claw and eventually you escape its clutches. However, when you emerge, you likely have some battle scars. After all, debt is a tough opponent. Maybe you had to sell your car or your house to rid yourself of your debt burden; perhaps you had to take your kids out of private school. Often, the scars of debt manifest themselves as lowered credit standing. For these folks, the fight is only half over when debt is extinguished because credit restoration is required.

Without a good credit score you may find it difficult to get a job, rent an apartment or get a car loan. However, people often choose to ignore this and appease their current fears of credit and debt. While it is extremely important to learn from one’s mistakes, allowing them to control your future is equally as bad. As terrifying as debt might currently seem, you may require responsible use of it in the future to buy your first home, for example. So give yourself that option by beginning credit repair today.

The best way to improve your credit score is to open a secured credit card account. While you might think that telling someone with past debt issues to get a credit card is tantamount to advising a recovering alcoholic to grab a bottle, a secured credit card not only does not have the typical pitfalls of a regular credit card but is also a great tool with which to rebuild your credit.

Why? Well, in order to improve credit standing one must dilute the negative information in his or her credit reports with a trend of positive, responsible use. The easiest and least expensive way to accomplish this is to use a credit card responsibly. This, in turn, can be accomplished in two ways. First, you can use your credit card for your daily purchases as long as you pay your bill in full each month. Alternatively, if you have serious doubts about your ability to use credit responsibly, you can simply open your account, lock your credit card away and never make a single purchase with it. Merely maintaining a credit card in good standing and at zero balance adds positive information to your credit reports.
Either way, your weapon of choice in this endeavor should be a secured credit card. Secured cards are both very dependable and relatively inexpensive thanks to the refundable security deposit users have to place when opening them. This security deposit acts as the card’s credit line and prevents the need for an expensive fee structure by providing an issuer protection against default. In addition, the security deposit protects consumers by ensuring that they will never spend more than they can actually afford.

Two of the most popular secured credit cards are the Public Savings Bank Classic Secured Visa® Credit Card and the Orchard Bank Secured Credit Card. The Public Savings Bank card has no annual fee so it is an excellent option if you seek credit improvement but do not wish to make purchases. The Orchard Bank card, on the other hand, has a 7.9% APR, making it great for routine use.

However, you should strive to make your credit card’s APR irrelevant by paying your bill in full each month because not doing so will make the card more expensive to use. Besides, who wants to basically pay interest on their own money?
So if you do find yourself struggling to pay your bill in full every month, either get to zero balance and stop using your card to make purchases or if you cannot resist the temptation simply close your account. Should you choose the latter, you will recoup any difference that exists between your security deposit and your current balance and will avoid making your debt more costly.

While you will not escape debt unscathed, the damage can be repaired. If your credit score took a beating, give it financial plastic surgery by opening a secured credit card and operating it responsibly. You will ultimately be thankful that you did so when you open the door to your new house or get hired for your dream job.

This article was written by Odysseas Papadimitriou, CEO and Founder of, an online marketplace for credit card applications and gift card exchange.


LifeAndMyFinances December 16, 2010 at

The secured credit card is one way to go. Another option, which might be safer for the natural spender, is the pre-paid card. Several pre-paid cards (these are NOT debit cards) offer credit-building options, and you’ll certainly not overspend since you can only spend the amount that is pre-loaded on the card.

Little House December 22, 2010 at

Years ago, my husband rebuilt his credit score by obtaining a secured credit card. The only thing one needs to be wary of are the secured credit companies with really high fees (annual and one-time fees). My husband went with a secured card through Wells Fargo, very low fees, that eventually converted over to a regular credit card as he became more responsible.

Darwin's Money December 23, 2010 at

I’ve never tried to calculate what having strong credit has saved me over the years, but it’s gotta be well into the 5 figures given car loans, home loans and more. It’s so important.

krantcents December 25, 2010 at

Getting out of debt is little like losing weight! If you don’t change your habits you will be right back to where you started. As you get out of debt, create new habits to avoid ending up back in debt.

Mark December 27, 2010 at

Many people forget about the building strong credit part. They clean up the bad info but don’t create a new positive trail.

Fox December 27, 2010 at


Well written article. I agree getting out of debt is hard, but it all takes time. Part of getting rid of debit is imporving your credit, they both work hand in hand.


{ 2 trackbacks }

Previous post:

Next post: