Rebuilding Your Credit with Credit Cards
If you’re looking for a way to improve your credit score, taking out credit cards may seem counterintuitive, especially if you’ve gotten into trouble with credit cards in the past. In fact, using credit cards to rebuild credit can be very effective if you know how to do it correctly. The goal is to demonstrate that you can use credit responsibly: to do that, you need some credit to manage.
If you’re just starting out, and you have no credit history, you can start off with a couple of store cards. They’re not hard to get since people tend to spend more at stores when they have a store credit card, so retailers like to issue them. If you have bad credit, however, rebuilding your credit can be trickier because it can be more difficult to obtain credit cards.
To understand how to improve a credit score, you need to understand the factors that go into determining your score. Your credit score is the number used to predict whether you will be able to pay your bills on time. Credit scores are based on information found in credit reports. The best way to maintain a favorable credit report is to pay all your bills on time, keep your utilization of credit low, keep accounts open for a long time, have a good mix of types of credit, and refrain from applying for credit too often.
So how can a credit card help you rebuild credit?
By helping you to demonstrate that you can use credit responsibly. If your credit isn’t good, the best way to do this may be taking out a secured credit card. A secured credit card is a card that requires a security deposit. This deposit determines your initial credit line and is kept in a separate account to act as collateral if you default on the card. This affords the bank protection while allowing them to safely offer you a line of credit.
You can use a secured credit card just like you would use a typical credit card. You can use it wherever credit cards are accepted and you must make payments on it each month. Some secured credit cards even offer perks like fraud protection, travel assistance, and auto rental insurance; in time, the bank may raise your limit if you consistently make your payments. Using your card and paying it off, as well as keeping your utilization low, will help your credit score to slowly increase. This will eventually enable you to obtain different types of credit, which will further increase your creditworthiness.
At First Coast Mortgage Funding, we offer creative solutions to help borrowers improve credit and overcome roadblocks when trying to secure home financing. Committed to helping people in the First Coast region buy and refinance residential properties, we specialize in every kind of property, working to provide home loans to our clients at the lowest interest rates, with the best possible service. Contact us through our website or call 904.217.5450 for more information.