Unsecured Credit Cards:
Both low and high limit credit cards can build your credit. Talk to the credit provider about limits and if there is a minimum balance to maintain on the card to improve your credit quickly. Paying off credit cards quickly will positively affect your credit while keeping the card at the limit (while making minimum payments) will neither increase nor decrease your score.
Secured Credit Cards:
Most people are familiar with unsecured credit cards (what most people think of when they think of credit cards), but secured credit cards are very different. Unlike debit cards, activity from a secured credit card is reported to credit bureaus. A deposit is placed down and used as collateral and you use the card much like any other line of credit. Purchases are made and payments are done every month. This is one way of repairing damaged credit and is a great place to start before moving on to loans and unsecured credit cards.
Credit cards are wonderful for emergencies but never spend more than you can realistically pay back. Major car repairs paid with credit can be a life saver but not if the monthly payments are too high for you to pay. If you are repairing your credit or just starting out from the beginning, start small—only use the card for things you can pay off in full when possible. It can improve your credit drastically and quickly. Eventually, it is wise to keep a balance on the card but keeping your spending low in the beginning is always the safe way to go.
Paying on time is just as important as making full payments. Delayed and late payments will negatively affect your credit and it can drain your rating quickly. When possible, set up automatic payments or some system of payment reminders, and try to pay before the due dates to allow for processing, mailing, and any other system the payment may need to go through.
When a credit company (stores, banks, credit unions, etc.) checks your credit rating before deciding to give you a loan/credit card, it gets reported to the credit bureau. Small cards from stores may not affect your rating if you keep them to a minimum, but attempting various loans (and getting declined) will alert other lenders to the declined offers and it can permanently affect your score.
Keep An Eye On Your Credit:
Some credit cards are now offering your credit score attached to your bill. Contact your bank or lenders and ask if they offer such a service. If not, shop around to find out who has the best rates (preferably free) to help you keep an eye on your credit. This includes debt you may have not known about or forgot, new debt, new lines of credit, and more. Keeping up with your score is the best way to keep it under control.
Credit scores are a major headache for most of us, but keeping a high credit rating will make your life easier when trying to take out any loan (including with My Rehab Lender) for a car, home, computer, and more. Contact us today to see how we can help your credit score be the best it can be!