Usually, we think of those with “bad credit” as having a FICO score that is below 550. A few major contributors to bad credit are financial difficulties like bankruptcy, trouble with paying credit cards or making loan payments. Regardless of your situation, it is possible to get yourself out of the bad credit zone and back into some higher numbers. Credit is hugely important, from getting loans to getting an apartment, so it is vital to get your credit score up. Here are a few suggestions to get you pointed in the right direction.
Avoid Subprime Credit Cards
Credit card companies will sometimes target those with poor credit because they realize that those with poor credit sometimes need the line of credit to purchase everyday essentials. However, they will draw people in with what seems like a great deal, and then hit them with fees and charges that they did not realize would be attached to the card. Read the terms carefully and understand the interest rates and any fees that the card will charge before you even consider applying.
Focus on Rebuilding Your Credit
Find a credit card that will not charge outrageous fees or a large interest rate. Use it for small purchases and then pay it off each month. This will help you slowly but surely increase your credit score. It will take some time and effort, but it will pay off. Keep in mind that you do not need to carry a balance from month to month to rebuild your credit. Paying it off every month is even more beneficial. In the meantime, if you need a line of credit for something like a small business, check out merchant accounts that are specifically designed to help in this situation. Find out more at eMerchantBroker.com.
Keep Up on Utility Bills
FICO (those who came up with the credit score system) recently announced that they will incorporate new data into their scoring matrix. This new data is your payment history for your phone, cable, electric, and gas bills. That means that paying your utilities in full and on time will help increase your credit score. So, even if you cannot open a line of credit, this will help your score gradually improve as well.
Apply for a Secured Credit Card
If you cannot obtain a traditional credit card, a secured credit card might be a good option. You put down a security deposit upfront, and as long as you make all of your payments, then that deposit will be returned to you. They do have a higher interest rate, so keep that in mind when you are considering your options.
Rebuilding your credit will likely be a slow process, but use these tips, and you will be started off on the right foot.