Consumers in credit card debt need to use plastic to rebuild scores

Credit card issuers and banks have tightened their lending restrictions as they try to make a profit in the tough economy. Consumers struggling with loan and credit card debt have become less inclined to take out another line, but as the New Jersey Star-Ledger reports, continuing to use plastic may be the only way to qualify.

“Credit is a catch-22,” O’Meara Financial Group representative Margaret O’Meara told the paper. “If you have used cash for your purchases and are in great financial shape with a positive net worth, positive personal balance sheets and no debt, you will be penalized for not using credit should you need a loan or credit card,”

Financial analysts, including O’Meara, recommend that consumers with poor credit history start out small. Opening a gas credit card or an account at a department store is the first step toward establishing a better credit history. Consumers should also make sure to ask if the issuer reports all activity to the national credit bureaus before applying.

Consumers with bad credit can also ask a friend or relative with a better history to co-sign for them. This can increase the chances for loan and credit card approval.