Credit is an important aspect of every consumer’s life and without good credit it can be difficult to get financing, lines of credit, and even a decent rate on insurance. It doesn’t take long for good credit to go bad. A few unpaid bills or a series of overextending credit limits can do serious damage on an existing credit score. Without good credit, you’ll end up spending way more money than you can likely afford.
Key to Rebuilding Credit
It does not make financial sense to carry around bad credit. It is important for all consumers to have an idea of where they stand credit-wise by ordering their annual free credit report and pay for their credit score at least once a year or before they seek financing. Without an understanding of where your credit rating is at you are unable to make smart decisions about financing and other personal finance matters.
The key to rebuilding credit is basically simple. You need to get back on track by making all of your monthly financial payments on time and budgeting your cash to make sure you do not overspend. Another key factor in getting back on financial track is utilizing a credit card that is created to help rebuild credit.
Rebuilding Credit-Credit Cards
There are two types of credit cards and both can help a consumer rebuild bad or lacking credit histories. Both card types are helpful in reorganizing your finances and allow more positive information to be reported back to the credit reporting agencies.
[ad#Left-Align Content Ad]The first type is the traditional unsecured credit card. An unsecured card is one that offers a credit limit and terms and conditions that vary by card provider. If you already have experienced bad credit situations, you may not qualify for a traditional unsecured credit card. If you do qualify, it is essential for you to pay attention to the interest rate and other terms because low credit scores often result in higher interest rate and unfavorable terms that can be detrimental to good credit.
The second type of card good for rebuilding credit is the secured credit card. This is a good alternative for those who have already had marks on their credit and can not secure a traditional card. A secured credit card requires an initial deposit to the card provider that will serve as the credit limit for the card. Repayments are required on the balance when purchases are made. The key element to using a secured credit card to rebuild credit is to ensure the card provider reports account data back to the credit reporting agencies. Not all secured credit card providers will report credit information which does not help to rebuild a consumer’s credit score.
Whether you are able to obtain an unsecured or a secured card, credit cards can be instrumental in strengthening a poor credit history. When used correctly, a credit card can rebuild low credit in just a few months. If a secured credit card is used in a responsible manner, they will boost consumer credit scores and open the door for approval for traditional cards with higher credit limits.
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