First, a little background on how your credit score is determined. One of the numbers that is used to generate your credit score is your "debt-to-credit ratio." This is simply how much you owe divided by the amount of credit lenders have given you. A high debt-to-credit ratio means you will have a worse credit score. For example, if you have $10,000 in unsecured revolving accounts (the limit of all your credit cards added together, for example) and your outstanding balance is $8,500 your debt-to-credit ratio is 85%. And that is bad news for your credit score. Lenders would like to see borrowers with a more reasonable (meaning, lower) ratio.



You could pay off a lot of your debt to lower your ratio, but that probably is not possible. The other way to improve your debt-to-credit ratio is by increasing your "high credit limit" by getting a new credit card with a big, fat limit. Sorry, but that is not going to be easy to do with your credit score. There is an alternative: a sub-prime merchandise card. These cards are available to those with poor credit. The catch is you typically have to put down a deposit, and you can only buy from the company that sold you the card.

Here is how a sub-prime merchandise card works: You get a $5,000 card and see something you need to buy from the vendor's website. Let's say it costs $500. You put down a deposit, and finance the rest on your sub-prime card. This new credit line will be reported to the major credit bureaus, increasing your high credit limit by $5,000! And the small outstanding balance will help lower your debt-to-credit ratio.

There are a few things you should know about sub-prime merchandise cards, though. First, they are not like a VISA or MasterCard. You can't use them at your supermarket or local Walmart. They are valid only for the vendor who gave you the card. So make sure that vendor sells something you need to buy, and that their prices are reasonable. And another factor when selecting a sub-prime card is whether the provider reports to one or more of the major credit bureaus.

Not all sub-prime merchandise cards are equal; not all communicate with the credit bureaus. It is critical that they do - otherwise your efforts will be wasted. The whole point of using the merchandise card is make sure that the reporting bureaus are informed about your new high credit limit and lowered debt-to-credit ratio. Then in a relatively short amount of time, you'll see your credit score start to rise. It's not magic - it's just making the system work for you.