Repair Your Credit

A bad credit score can really affect your ability to create the life you want. You will be turned down for loans, or given very high interest rates. Buying a house, a car, or even finding investors for your business becomes next to impossible. There are even some employers who look at credit score as an indication of your character and sense of responsibility.

So how do you improve your credit score? Ironically, one of the steps you should take is to get a credit card. It’s true: misusing credit cards can really lower your credit score…but with enough credit card savvy, it can also help you repair it. Each time you successfully pay your bill, or accumulate months or years of “clean” credit card use, then your score improves.

Of course, it may be difficult to get approved for a credit card with a bad credit score. One option is to get secured credit cards. These require you to put up collateral like a security deposit which are equal or even higher to your credit limit. Some examples of possible security deposits are cars, jewelry or stocks.

Secured credit cards will not really have very high credit lines, but that is okay. Your purpose in getting one is to improve your score, which means you should be paying the balance in full each month anyway. In fact, it is advisable that you leave your credit card at home, at least until you have your spending habits in full control.

If you need a higher credit limit (for example, if you use it to pay all your bills so you only have to worry about making one payment a month, or if you are a businessman who frequently travels) you can ask for a higher limit after you have developed a consistent record of regular payments. However, bear in mind that too high a credit limit may encourage you to rack up those charges.

Another alternative to secured credit cards are prepaid cards. Here, you determine your credit line: how much you transfer will define how much you have to spend. This is an excellent way of rebuilding your credit history and sticking to your budget. They also do not charge finance fees, but they may require an application fee. If you go over your limit, you may also be charged a fine. Always read the fine print before signing up for a prepaid card.

Responsibly using your new credit cards is a good step towards credit repair. However, it’s not the only thing you need to watch. You should pay your utility bills on time, and avoid getting any disconnection notices. To avoid late payments, enrol your bills in an automatic debit arrangement These fees will be deducted from your salary account. It’s very convenient (you don’t have to worry about writing checks or lining up at payment counters). Also avoid applying for several loans at the same time, or using more than 30% of your credit card balance.