Building credit after paying off old debts

Dear Experian,

I have just paid off all of my bad debt, but I only have one good standing loan, and that was back in 2005. What would be the best way to improve my credit? I heard getting a pre-paid visa would work, is that true?



Dear DRM,

You have already done exactly the right thing in paying off your debt. Now you need to demonstrate that you have learned from your mistakes and can manage new debt.

Getting a pre-paid card will not help rebuild credit because pre-paid cards are not reported to credit reporting companies and, therefore, are not part of your credit report. If you can’t qualify for a standard credit card, you should consider a secured card where you deposit funds in a savings account to guarantee that your charges on the card will be paid if you fail to pay as agreed.

Apply with your bank or credit union for a secured card with a small credit limit that is reported to the national credit reporting companies. Use the card sparingly and pay off the balance each month. Over time you will build a history of positive credit management.

Eventually, the negative account information will be deleted, leaving only the positive account details.

Remember, you didn’t get into credit trouble overnight, and you can’t restore a great credit history overnight either. But you are definitely headed in the right direction. Time and patience are now your best allies.

Thanks for asking.

- The “Ask Experian” team

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