Bad credit can follow you for years and result in higher interest rates and credit rejections, and it can be challenging to find work with bad credit. If you’re sick and tired of your present credit situation, and you’re ready to build or reestablish your credit, applying for a charge card gets you closer to your goal.
It might come as a surprise, but you need credit to build credit. Bad credit is fixable, and if you learn the right ways to manage credit and debt, you can slowly add points to your credit score and go from bad credit to good credit in one or two years. Here are four ways charge cards can build your rating.
Get a credit builder card
If you have a low credit score, you won’t qualify for every type of credit card on the market. But many banks offer credit cards specifically for people in your situation. Credit builder cards typically come with a low credit line, but since these cards have minimum credit requirements, they’re an ideal choice for people with no credit or bad credit.
Also called secured credit cards, these cards require a security deposit, and some charge higher interest rates and monthly fees. Rather than get discouraged because of fees, think of credit builder cards as a steppingstone to an unsecured card. Before applying for a credit builder card, make sure the bank will report your activity to the credit bureaus every month.
Pay your statements on time
If you don’t pay bills on time, you might never repair your credit. Timely payments make up 35% of your credit score. So always pay your credit card statements on time every month, preferably days before your due date. If you’re going to be late, let your credit card company know in advance so you can make other arrangements and avoid late fees.
Pay off your balance in full every month
Keeping a low credit card balance also helps improve your rating. You have to use credit to build credit, so don’t be afraid to pull out your credit card from time to time. The key, however, is only charging what you can afford and paying off your balances every month. If you do carry a card balance from month-to-month, this balances should never exceed 30% of your credit line. The amount you makes up about 35% of your score.
Check your credit report
Credit card companies make mistakes. Therefore, never assume the information on your credit report is accurate and up-to-date. It’s important to order your credit report at least once a year and check these reports for accuracy. You can get a credit builder card and manage this account responsibly, but it won’t do you any good if the creditor doesn’t update your credit report with accurate information. Additionally, periodically checking your own credit report is one of the best ways to detect fraudulent activity before it’s too late.
