You’ve undoubtedly been bitten by exorbitant interest rates that left you more than frustrated, bewildered and in pure agony. Industry experts know that it only takes a few months of consistent, solid financial behavior to “fix” any bad credit score. Here are several credit-building strategies (using credit cards) that will make it easier for you.
1. It’s A Debit Card
One of the most dangerous pitfalls people face, concerning credit cards, is the bank account balance. Therefore, it’s easy to forget how much money has been used to buy however many number of items. Treating your credit card like a debit card will allow you to spend only the money that you know what you’ll be able to pay for in full by the end of the month.
2. Go With Bad Credit
Not everyone can receive the perks and rewards offered by the top-tier credit cards. That’s why it’s more wise, manageable and realistic for you to focus on credit cards made for bad or fair credit, such as secured cards, which require a security cash deposit. Doing so helps you rebuild your credit. While they may not offer perks as impressive as regular, unsecured cards: applying for new credit cards remove points off your FICO score. If you open an unsecure account, then close it to open a secured card later, your FICO score will suffer.
There are a countless numbers of credit cards on the market today. Luckily, there are just as many Credit Card Reviews that compare the differences between major accounts, perks, benefits and rates. Knowing what to look for is more important than ever – especially if you don’t know what you may be missing. That’s why it’s important to shop around and compare what you see. Compare APR (interest rates), annual/membership fees, any reward programs, and offer reasonable spending limits.
4. Keep Accounts Open
Lenders like knowing that when they lend you their money, they will get it back in a reasonable amount of time. This is called “the predictability factor.” The more predictable you are with your payments, the more comfortable lenders will be with you – and gladly lend you their money. Because you gave them their initial investment back, they will have little problems lending you more of their money. Increasing your predictability is as simple as keeping a credit account open for as long as possible. 15% of your FICO score is due to the length of your credit history, which is significantly altered by the frequency of which you open and close credit accounts. That is why it is unwise to shuffle from one card to another.
5. Don’t Ignore Your Bills
Did you know that over 35% of your FICO score is due to your payment history? Ignoring bills and not paying your credit cards is one of the most destructive things you can do (if not the most). Your score will only continue to plummet, and you will only rack up more debt, if you do not increase your financial intelligence and perform punctual payments on a consistent basis. One of the easiest ways to do so is to use auto payments for recurring bills, whenever you can.
Regardless of the advice you’ve found here, I must urge a word of caution: if your credit score is suffering due to consumer debt (and ongoing credit card debt), think twice before using your credit card to rebuild your score. Responsible credit card use, without carrying debt, will keep issuers from being a nuisance.