If you have been plagued with credit problems in the past, I would like to welcome you to your future! The first step in the process to rebuild credit is to get a new credit card. While many people will debate the best type of credit card such as secured or unsecured, I would argue that the type does not matter! What matters most is getting something and using it effectively! The old school idea on credit was to get a card, make a large purchase and pay for it over time with no late payments. Today, that rule has changed! While making payments on time is VERY important, making the large purchase is the wrong thing to do! The way credit scores are made up, large revolving accounts (like credit cards) with high balances actually hurt your score. They figure that if your card is nearly maxed out, so is your budget and one emergency such as a flat tire could make you late on other payments. The trick to maximizing your credit score is to use your credit card as a tool. No matter what your credit limit is, keep the charges to 20% or less of the limit. In other words, if your credit limit is $500, charge no more than $100 to the account. The most effective program is this.... When you get your bill each month, pay off the complete balance. Then each month simply make a small charge, like a tank of gas, gym membership or something else you normally would do anyway. Don't use the card for dinners or special sales... only small charges ($30-40). Then again, as your bill arrives each month, pay off the balance. Each time your bill is sent out, the balance is reported to the credit bureaus. So you will always show a $30-40 balance, recent activity, and no late payments. You won't even pay interest on your charges since they are paid off each month! But the activity and low balances will kick your credit score into overdrive in a short period of time! If you use credit as a tool and not as a gift card, you will be able to get the best deals on everything you need. It just takes balance and determination. Best of luck! |
