Whether you have recently filed for bankruptcy or are just looking to build up your credit after some bad debt in the past, there are various paths you can pursue. Keep in mind that it will take some time to rebuild good credit, but you will get through it. Many companies are out there to help you get back on your feet! Stay positive and follow these tips.
Don’t Want To Use Credit Cards?
It’s not mandatory to obtain more credit cards in order to build your credit back up. Whether you can’t get a credit card or are simply afraid to use them again, there are various alternatives.
Credit unions are one of the best places to start. Through your local credit union, you can obtain a “secure loan” which is backed by a certificate of deposit or by money in your savings account. Credit unions actually want to help you get a loan and aren’t looking to shoot you down because of your poor credit score, like most major banks.
While you don’t have to own a credit card yourself, you can very easily become an authorized user on someone else’s credit card. Make sure this person is responsible with their card and makes payments on time. When you become an authorized user on someone else’s card, their history is usually added to your credit report.
Obtaining a charge card is another alternative. A charge card differs from a credit card in that there is normally no spending limit but you are required to pay your bill off in full every month.
If you are applying for a loan and strongly believe that you will not qualify, you can add on a co-signer. With a co-signer, both people are equally responsible, so be sure to make the proper payments each month. Accessing a loan like this is a great way to build your credit score.
Utilizing New Credit To Rebuild Your Credit
Adding positive credit to your credit report is an important and vital step in the rebuilding process. As old debt is paid off or removed, new credit should be established to create a positive credit history moving forward.
A secured credit card is a fantastic way to start rebuilding your credit. With a secured credit card, a deposit must first be made into a savings account in order to obtain credit on the card. By putting a certain amount into a savings account, you are able to charge up to that amount on the card. As you can see, this type of card is tied directly to your savings account. Make sure to keep the balance from getting high and always make your payments on time.
Getting a retail store credit card is another easy way to bump up your credit score. Retail credit cards are typically easier to get than other types of credit cards, as many stores don’t care as much about the applicant’s credit score. They look more at your annual income. Many clothing, furniture, and appliance stores all offer store cards that are fairly easy to apply for.
Keep in mind that although you may be receiving a new card with a decent sized limit, it is smart practice to never charge more than 30% of your available credit. Shoot for around 10%, and always pay off the balance in full. If you max out your card, you may run into additional problems down the road, such as making payments. Then you may be stuck with more debt than you planned.
It Takes Time
Please keep in mind that it may take a year or two to rebuild your credit from scratch. By following these steps, you’re on your way back to a high credit score and a great life ahead of you!
