Using a Credit Card to Build One’s Credit Rating
Posted on June 28th, 2011
If you’ve ever used a credit card to build your credit score, you’re not alone.
With so many financial decisions weighing on a decent credit score, rebuilding good credit after bad financial decisions is at the forefront of most people’s minds.
Applying for a credit card after a bankruptcy, foreclosure, or other financial ruin can actually be a good thing.
A bad credit rating may mean a lack in low-interest offers, so it may be a good idea to visit sites like moneysupermarket.com to find the best deals. The best offers may come in the form of 0% introductory periods.
Once you’ve qualified for a low-interest card, begin building credit by making modest purchases and paying off the balance on time. The best way to do this is to buy something for which you already have the cash and pay it off immediately when the bill comes due.
Staying out of debt is a must when rebuilding your credit rating. This may seem contradictory, considering you have to take on some debt in order to build credit. Never use credit cards for purchases with amounts you simply cannot repay in a few months’ time.
Since most people have gotten bad credit ratings because of past credit card misuse, a little self-discipline goes a long way.
If you notice your spending habits getting out of control, stop using the credit card and put it in a drawer at home. Pay the balance and put it out of your mind for a while.
There should come a point when you can use the credit card for everyday purchases such as groceries, but never charge these items unless you fully intend to pay them off immediately. Charging daily items can add up without you realizing, accruing more debt than you may think.
A safer option could be a gas card. These are credit cards designed only for gas purchases at certain stations. The bonus here is that you can only charge one item: gas. This decreases spending temptations.
You may find a trusted family member with good credit to co-apply for a credit card, which will make your credit rise faster. Keep in mind though that any late payments will negatively affect both you and the family member, so not everyone is open to this option.
When building credit, consider a secured credit card.
Secured cards allow you to put up a specific amount of money, acting as a prepaid card. Some secured cards charge monthly fees or even inactivity fees, so be aware of this up front and make sure they will report your activity to all three credit bureaus. If not, find another one.
Research credit card options thoroughly and find websites that allow you to compare different cards. This lets you see any differences in interest rates, APR, fees and balance transfers.
Rebuilding credit is not easy, but you may find more creditors willing to give you a card than you may think. Learn from your past mistakes and practice self-discipline. Be organized, responsible and pay all bills on time.
Doing so will get you back on track in no time.
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- Credit Card Debt | Discover Great Tips For Paying Off Credit Card Debt
- How Your Credit Card Can Hurt Your Credit Score
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