From Bad Credit To Excellent: Step By Step
Bad credit history sounds like a sentence for many people. But is it so? Let’s consider the issue of bad credit in more detail.
Our life is unpredictable, and we never know what can happen. We are not insured against anything. However, it is important to remember that there is always a way out or even several ways. You can have any reason for your bad credit history, the only thing you need to do is to think about the appropriate solutions to this problem. In this article, we have prepared a material that will be useful to anyone who wants to build or has already started building his credit history.
First of all, you need to estimate accurately your financial opportunities and check your credit score. Then, we would advise you to explore all possible options which suit you.
Below you can see the most common options for people with a bad credit history.
• The first option is applying for a personal loan. Just make sure you have an active checking account before you apply as you will need to provide it in your application. When approved, your money will be deposited to your account. Whatever your reasons are, if you need some more money a personal loan can really help. For instance, your credit card interest rates are high, you need to make a major purchase, want to deal with medical bills, pay down debt, start a new business, something unexpected happens or even improve your credit. The lender will report your monthly payments to the three credit bureaus—Equifax, Experian and TransUnion. So, a personal loan can help you build or rebuild your credit history. For credit history improving, you need to make all your payments on time and never miss a payment. You do not have to make a security deposit or provide collateral since personal loans usually are unsecured. It is a risk for lenders, so there are higher interest rates, but a high score may help you qualify for a low interest rate.
• Another good option is credit cards. Unfortunately, most credit cards will not approve an applicant with no income and bad credit. Credit card issuers want to know if you are able to pay the credit back. However, you can find a way out of any situation. Let’s look at the different types of credit cards that can solve this problem.
• An unsecured credit card. Some credit cards for people with bad credit will have a low credit limit, high APRs and other fees, so be sure to read the terms and conditions thoroughly. There are some very good low-fee credit card options for people with bad credit, but you will need to review the terms and conditions to find the best one for you.
• A store credit card. There are credit accounts like Fingerhut Credit Account or Horizon Gold, which offer guaranteed approval with no credit check and allow you to buy merchandise from their online catalog. These cards are not regular unsecured cards – they allow users to buy merchandise from their catalogs or web sites only. However, they report your activity to major credit bureaus, so your credit can begin to improve if you make regular, on-time payments and keep to the terms of your credit agreement.
• A secured credit card. This type of cards is good for those who are rebuilding their credit. If approved, you will need to pay a security deposit to receive your card. The minimum amount of the deposit is usually around $200 and it will give you an equal line of credit. The lender will also report your monthly payments to three credit bureaus. And make sure the deposit you make on your secured credit card is fully refundable.
Benefits of secured cards include:
• Limited or damaged credit history is not an obstacle to get approved
• Most report to major credit bureaus, so they will help you improve your credit score and rebuild your credit history.
Drawbacks of secured cards include:
• Fees including startup fees, monthly fees and/or deposit
• High APRs – it is best not to carry a balance from month to month on a secured card because of the high interest rates
Once your credit is on the mend after using one of these cards responsibly for a time, you will be eligible for credit cards with lower fees, low APRs, and higher limits.
Please note, it is very important to thoroughly read the terms and conditions of the offer you are going to apply for and contact the issuing bank if you have any specific questions.
It is also worth paying attention to the fact that some secured credit cards, with no debts and proper payment management, can be upgraded to unsecured credit cards in the future. And you will be able to build your credit history further.
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