I remember my credit clients used to absolutely HATE when I tell them that they need to get a credit card in order to see a real boost in their credit score! The majority feel that they lack the discipline to use the card responsibly. Although I definitely understand, (sometimes I have to hide my cards as well) credit cards are going to be the fastest way to build a credit score especially if you lack existing credit. The best tip I can give someone who is recovering from bad credit is a secured credit card with a high limit. Income tax time is the best time to invest in this. Here are a few tips when obtaining a secured card:
- Put away a portion of your tax return that you can use as a sort of savings account for yourself to open your secured card. The more money you are able to put into the secured card the better, however you don’t want to put more than you can afford Choose a reasonable amount that you can afford to put up and not use.
- DO NOT under any circumstance use more than 20%. This will increase your credit utilization and decrease your credit score.
- It is important to know your statement date as well. If you do have to use the card, you want to make sure you pay the balance in full before your statement date.
- Do not make any late payments. I know that it is easy to forget due dates but payment history account for 30% of your credit score. If you are more than 30 days past due on your credit card they will report it to the credit bureaus and it will impact your credit score negatively.
- The bigger your credit limit, the more improvement you will see to your credit score. After you have had the card for about six months you can then apply for an unsecured card. I recommend Capital one if your credit score is still struggling as your chances are greater of getting approved with them. *Do not close your secured card if you are approved for an unsecured one* As long as you keep the balances low on your two credit cards you should see a major increase in your credit score!