A lot of people have fallen a little short of cash these days and have ended up damaging their credit rating because of it. If this sounds like you, you might be wondering how to build your credit rating back up after it has taken a fall.
Then again, you might be young and have no credit rating at all, which can seem almost as bad as having a poor credit rating when you are trying to purchase a major item like a car. You, too, can build a good credit rating with a little effort.
Tips for Building a Good Credit Rating When You’ve Got Bad Credit
Building a good credit rating is difficult, although not impossible, if you have poor credit. For one, your poor credit score will prevent you from getting approved on large loans or major credit cards from most banks. However, there are people who can help you get the credit you need to begin to show you’re responsible with your money.
You may have fallen on hard times and many financial institutions realize this. They are willing to give you a hand in building your credit rating back up. However, you’ll have to pay more for it compared to someone who has a good credit rating. You can get a credit card (called a “bad credit” credit card) that has a low amount of available credit and high interest rates. The trouble with these cards is that you have to be willing to pay the fees.
Fees on “bad credit” credit cards can run as much as a couple hundred dollars just for opening the credit account. Institutions that issue such credit cards typically apply the fees directly to your credit balance, leaving you with nothing to spend but payments to make. It is up to you to decide if the fees are worth it to start building your good credit again.
Tips for Building a Good Credit Rating When You’ve Got No Credit
What if you have no credit at all? You still need to build a good credit rating. Consider applying for a credit card from a retailer. You will probably be approved for a small limit, which is fine because you don’t want to end up overextended with your very first credit card. What you do then is use the card to make a couple of small purchases that will amount to a little more than your minimum payment.
When your monthly statement comes, pay the minimum amount or a couple of dollars more, but don’t pay off the credit card each month. You’ll want to carry a balance on your credit card for a little while in order for your credit card and timely payments to show up on your credit rating. However, be sure to make your credit card payments on time. Not only do credit cards charge huge late fees, but they report late payments immediately to the credit bureaus, which does not come off your credit report.
You can also apply for a small personal loan through your bank. If you’ve had a checking and savings account with your bank for a while and it has always been in good standing, talk to a banker and let her know you want to build your credit rating. She will be able to work with you on possibly getting a small, short term loan that you can pay off in a year or less. Your loan does not have to be paid off in order for it to look good on your credit rating, it just needs to have a history of on time payments. Before you know it, loan companies will be inviting you to take their credit.