A bad credit history can be a real financial nightmare. You are refused loans, or given loans that carry abnormally high interest rates, and you feel low-down and bad about your condition. So, it makes sense to raise your credit score and get some financial normalcy back into your life. One way you can raise your score is by taking and efficiently using a new credit card. Yes, you heard that right – you can actually use a credit card to rebuild credit, and here’s how:
1. Get a new credit card. You may have had a bad experience with your previous credit cards and may have vowed to stay away from credit cards, but that’s not how you should approach your problem.
2. If your credit history is way below average and if you are unable to get a regular credit card, then go ahead and get one from your local department store or get a secured credit card. A secured credit card works best because your credit limit is based on a deposit that you have to make. You cannot use more credit than this, and you must pay the credit card bills on time, else the card company will forfeit your deposit. Secured cards help you spend wisely and their APR is very low as well. Some card companies offer credit cards for people with a bad credit history. But such cards carry a high APR and high fees. Our suggestion is to go with a secured credit card or a department store credit card.
3. Here’s a tip: Don’t take a prepaid card because its transactions are not reported to credit bureaus, and so, such cards are of no help.
4. While applying for a new credit card, ensure that you do not paint the town red by making too many applications. If you do, your credit score will be negatively impacted. Apply only when you are reasonably sure you will get the card.
5. The next step is to start using your brand new credit card. However, remember that you got into trouble in the first place because you did not pay on time, and so now you must ensure that you develop financial discipline by following good financial practices. If you’re serious about improving your credit card score, pay on time and pay in full. If you make minimum payments, you will be charged interest and your credit score will not improve. So learn to spend what you can afford and make the full payment in time.
6. Ensure that every payment is on time because if a debt collector is appointed to go after you, a note will be made in your credit report and this sticky, ugly note will stay for 7 whole years.
7. Over time, you credit score will start improving along with your financial habits. Remember not to expect results overnight. You must persevere in your effort to boost your credit.
So, once your credit score starts improving, lending companies will start looking at you in a new, positive light and the smile will return to your face. One last thing before you get ready to start: Do not take many credit cards for rebuilding credit – just go with one or two cards, and good luck.