Rebuilding Your Credit and Avoiding Traps

Most credit snares are built around misinformation and the temptation to use shortcuts. The proper use of credit cards, and rebuilding your credit requires time, patience, and the systematic formation of good habits. Anytime you hear someone promising you solutions to your money or credit problems that are quick, easy, or cheap, you should immediately suspect that the proposed solution will be long, hard and expensive.

Using Credit Cards

Take some time - shop around and compare rates. If you have poor credit you may not qualify for the best rates, but there is still enough competition in the credit industry to guarantee that you can find different, and probably favorable, rates to choose from if you take some time to check out several different alternatives.
Don't jump at introductory rates - phrases like "0 percent on balance transfers" and "5 percent on purchases for the first year" can certainly get your attention, but are often traps that obligate you to high future rates when the introductory period is over.
Read the contract - while this can be a difficult task, make sure you understand what you are getting into when you get a credit card. Thirty minutes of looking over a credit card contract could save you hours of headache if something happens later. Be sure to note provisions about balance transfers and cash advances.
Don't get too many cards - it doesn't look good on your credit report, and may be a beginning sign of financial trouble. Even when you see an offer for 10 or 20% off an item if you will just sign up for a department store credit card, you should consider the long term impact rather than short term savings.
Make more than minimum payments - making minimum payments maximizes income for the credit card companies at your expense; so, payoff credit card balances as quickly as possible

Rebuilding Your Credit

Unfortunately there are no secrets or shortcuts to rebuilding your credit and you should almost always avoid entities advertising their ability to rapidly improve your credit rating. Usually, they are more interested in collecting a fee from you than they are in making any lasting improvement in your FICO score. Such so-called services are almost never worth the cost in money or time and even more rarely provide the benefits they promise. Timely, consistant payments of all debts is the only tried and true method for improving your credit.

For more information on protecting yourself from credit repair scams, see the U.S. Federal Trade Commission article "Credit Repair: How to Help Yourself"