1. Get a secured credit card.
- A secured credit card works just like a regular credit card with one major difference; you have to make a deposit. So you would make a deposit, typically $300-$2,000. You then have an available balance equal to that amount.
- You get your money back when you cancel the card or, sometimes, after you establish a history of on-time payments with that creditor.
- Your payment activity is reported to the credit bureaus just like a regular credit card. No one can tell that it’s a secured card. Keep the card until you can qualify for an unsecured card and then cancel the secured card.
2. Get a loan.
- Here is a trick real estate investors have been using for years: Deposit $1,000 in a savings account. Then take out a loan against that account; the account will be frozen. Take that $1,000 loan and open up an account at a different bank. Do the same thing. Two or three loans are enough.
- Now you have several loans and an extra $1,000. Use that money to make payments on your loans. As you pay down the balances, an equivalent amount will be freed from your savings accounts. Pay off the loans in a few months and you’ll have some great positive credit on file.
- An alternative if you don’t have any money to start is to borrow the initial $1,000 but let them hold the money. You make the payments and get the $1,000 after the loan is paid off.
3. Pay on time.
- Keep in mind that a significant part of your credit score is paying on time. From this point forward, never be late. Just don’t do it.
4. Pay down your balances.
- The amount of money you owe versus the amount you can owe is called your utilization rate. So if you have a credit line on your credit card of $10,000 and you currently owe $6,000, your utilization rate is 60%. If it’s more than 30%, it hurts your score.
If you’ve had some credit challenges, then there’s no time like the present to start building some new, positive credit.
You might think that you don’t have any options available to you; after all, you need decent credit to be able to get credit, right? Not really – there are always options.
Good credit makes life easier; it also makes life less expensive.
Bad credit not only can prevent you from being able to borrow money in the future, but it can also cause you to pay much higher interest rates when you are able to borrow money.
Start rebuilding your credit today for a healthier financial tomorrow!