Rebuilding Your Credit? How to Use It So You Don’t Lose It

Time to get control of your credit

The best gift I received for my 40th birthday this year was a total surprise: I was finally approved for a credit card after 15 years of living without one.

If you think there’s a backstory there, you’re right. Coming from a working-class background meant I didn’t have much money to start with. As a grad student, I survived on student loans and a paltry stipend. My financial situation was compounded by the deleterious effects of childhood sexual abuse and debilitating depression.

I eventually dropped out of grad school and took a job in a doggie day care. It paid minimum wage, and I’d spend parts of my work day crying, surrounded only by dogs. I robotically placed each bill that arrived in the trash. I felt so utterly hopeless that tending to my bills was more than I could manage. It took every bit of my strength to simply survive.

Over a period of years, with the help of therapy and medication, I slowly began to improve and become functional again. But by that point, the damage to my credit was done. My student loans were in default, and my credit card had gone into collections. I started the long, arduous process of rebuilding my credit.

So, when I was approved for a legit, unsecured credit card, I was thrilled. But I was also utterly terrified to use it. It represented a long and hard struggle to not only get my head above water, but to begin to actually get ahead financially.

Good credit, which I lacked for so long, has many benefits that help people achieve success and financial security. But considering the fact that the average amount of credit card debt among households that carry a balance is a staggering $16,048, using my new card felt tenuous and fraught with risk. I wanted to benefit from its advantages, but I didn’t want to make any mistakes that would hinder my progress. Here’s what I did to rebuild my credit, one month at a time.

Operate From a Place of Need, Not Want

It can be tempting to use your credit card to treat yourself and your loved ones to things you want, especially if, like me, you have been living with zero financial wiggle room for a long time.

I definitely wrestled with this initially because my credit card suddenly made it possible for me to make big purchases. Having money at my disposal was a powerful, heady feeling I wasn’t used to after living from paycheck to paycheck. But I learned that in order to successfully use credit, I had to approach it very conservatively.

Always Pay Your Balance in Full

Paying your balance off in full not only shows creditors that you pay your debts in a timely fashion, but it keeps you from paying interest. If you make only the minimum payment each month, you’re barely paying off last month’s interest. You’re not making a dent into what you actually owe.

Plus, if you’re still using the card while making only minimum payments, the amount you owe will only grow each month. One expert calls it the debt treadmill — and I can’t say I disagree.

If you aren’t able to pay off your credit card in full each month, ask yourself if that new item you’re thinking about charging is worth the sticker price, plus the interest you’ll pay on top of it.

If You Carry a Balance, Always Pay More Than the Minimum

Accidents and emergencies happen; they’re part of life. If you find yourself needing to rely on your credit card for a costly, unexpected expense that you can’t pay off in 30 days, then at the very least, pay more than the minimum payment each month until it’s paid off.

A good rule of thumb? Aim to pay at least twice as much as the minimum payment. This will drastically reduce the amount of time you spend paying off your balance.

Ultimately, it’s best to avoid using your credit card for emergencies. Instead, have a cash emergency fund in place. That extra financial cushion can keep you out of credit card debt if a critical situation arises.

Be Wary of Benefits-Based Cards and Store Cards

Once you begin successfully using and paying off your credit card, expect more offers of credit to come your way. I’ve certainly seen my mailbox padded with them. With their tempting points systems, store cards make it seem like they will save you money. But the reality is often the opposite.

Recently, I was nearly seduced into an Ulta store card. The bonus points seemed magical, and visions of lovely new nail polishes and eye shadows danced in my head. But I checked the fine print and discovered the interest rate was 26.24 percent!

Needless to say, I didn’t apply. I was also reminded that I don’t need points. They will only entice me to shop from want, not need, and to live outside my means.

I’m proud to say that I have limited my credit card spending to only what I need and that I can afford to pay my balance in full each month. My credit score keeps improving, and I continue to be inundated with offers of credit. But I’m not falling for those old tricks anymore.

Join the Discussion

6 Responses to “Rebuilding Your Credit? How to Use It So You Don’t Lose It”

  1. BlueMuffinTop

    I love getting your Daily emails, and I always look forward to your advice. Reading this one really brought me to an ugly place from a long time ago that I remembered in my life. Its been quite a few decades for me but I too, learned my lessons from a bad marriage and subsequent divorce about money and credit, trusting a spouse who has a lousy history with money. Your emails inspire me!

  2. llr

    How to use it? Put one monthly recurring bill on it (utilities? Netflix? etc), set an automatic payment for the credit card, and try to forget the card exists except for emergencies – for now at least. This builds a record of current responsible use. Other than for travel or emergencies, you’ve been getting along without it so why tempt yourself now?

  3. James R Wharton

    I noticed that you did not mention making multiple payments each month. For example, you mention paying double the minimum payment due each month (if carrying a balance). I think the better strategy is to pay the minimum payment due twice a month. This provides two distinct advantages:

    1. It reduces, or eliminates, the possibility of a late payment which is an important component of your credit score.
    2. Generally, you don’t know when the credit issuer will report your current balance. This increases the likelihood that you are reported as using less of your available credit. This is also an important component of your credit score.

    In my case, on the card I use most frequently, I pay the current balance owed every Friday.

  4. Shanna

    Thank you for this. I’m an adult survivor of childhood sexual abuse as well. I know it’s not the main point of this article, but having you state it plainly and acknowledge that your financial health (or lack thereof) was linked made me burst into tears. It’s liberating to know there are others out there who are putting their lives back together after early trauma. Thank you and much love.

  5. Karen

    How did you even start rebuilding your credit?

  6. hihowareya

    Ok, the lead is good. But the writer never addresses HOW the best gift received for her 40th birthdayou was being approved for a credit card.
    It doesn’t sound like a gift to me. It sounds like a nightmare.