Credit Rebuilding Can Be Done With a Credit Card
A credit card can be used as a tool to help rebuild your credit. A few steps need to be followed though to ensure your success.
We have all heard about and felt the credit crisis in one way or another. Many consumers have missed one or more personal loan payments or have defaulted on a credit card. As a result, many consumers are now hampered by a below-average credit score. This, in turn, raises red flags for lenders and, in their eyes, makes you a bad credit risk.
Don’t be afraid if this is your situation. You can begin to rebuild your credit by using a particular kind of credit card. If you obtain one of these cards, it will be necessary to use it wisely in all respects. You will start to notice your credit score rising as you improve your spending habits.
Are you wondering what type of credit card you should or should not look for? Well, if your credit is suffering, it is wise not to apply for an unsecured credit card which generally offers a low annual percentage rate (APR) and many benefits. Your credit score can actually suffer even more if you apply for one of these unsecured credit cards and you are denied. Instead, search for a good quality secured credit card. Approval is normally guaranteed if you apply for a secured credit card.
The same benefits are usually provided with a secured credit card as with an unsecured credit card. You will still be able to use your new credit card for transactions involving goods and services, in addition to ATM withdrawals and online purchases. These two types of credit cards are basically the same except that you will have to provide a “deposit” for the secured credit card prior to using it. The amount deposited will then be your credit limit. The minimum deposit amount is normally $100, however, if you want, you can deposit more than $100 so you have a higher credit limit.
When shopping for a secured credit card, make sure that you choose one that reports to the three major credit reporting bureaus - Experian, Equifax, and TransUnion. If a credit card does not perform the reporting function, do not even consider it because it will be a waste of your time with regard to rebuilding your credit.
Besides looking for a credit card that has the lowest and fewest charges, be sure to find the one with the lowest APR. Fees, penalties, and charges differ widely between the secured credit card companies so be sure you are getting the best deal.
So, now you have your brand new secured credit card in hand. What now? From this point forward you will need to handle and manage your credit card carefully and with great consideration. Remember, the idea is to rebuild your credit, not dig your hole deeper. You should consider purchasing a few “small” items on the card each month. Then, turn around and make payment well in advance of the due date. It is even more desirable if you pay the balance off each month. I did say “small” items!
If you are using your credit card wisely, each month your credit rating should increase a bit. Before too long, you will be considered a “good” credit risk.
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