The idea that you could possibly use credit cards for your benefit when
recovering from overwhelming debt seems counterintuitive. However, if
you use credit cards in responsible, intentioned ways, they may actually
be able to help you rebuild some of the negative
effects on credit scores that bankruptcy and various debt issues can inspire.
When you are attempting to rebuild your credit score, it is imperative
that you pay your bills on time. Failure to do so will ultimately harm
your credit score, no matter how much of any given bill you pay off each
month. Therefore, if you cannot pay the minimum balance on your credit
card each month and you cannot do so on time, aim to stop using credit
cards until you can do so.
If you can pay at least the minimum balance each month on a credit card
and can do so on time, it may benefit you to use a credit card as you
are rebuilding your credit score. The kinds of data that are reported
to credit bureaus vary from credit card company to credit card company.
However, it seems that companies are increasingly opting to report the
payment amount that you make each month. Therefore, it can be potentially
beneficial for your credit score if you pay off your credit card balance
in full each month.
It can also benefit your credit score if you use no more than 30 percent
of your credit card’s available credit each month. This intentioned
spending will help to signal to creditors that you aim to live within
your means on a consistent basis.
Source: New York Times, “
For Better Credit Score, Max Out Payments, Not the Card,” Ann Carrns, May 9, 2014