Bad credit is reversible, wherein you’re able to get a good interest rate on home loan, auto loans and other types of financing. Different factors lead to poor credit. But you can rebuild your credit history and maintain a high score. In fact, it’s possible to re-establish a credit history using an unsecured credit card.
Warning:
Limit the number of credit cards you possess by cutting them down to the most essential ones. Rebuilding credit involves obtaining new lines of credit and periodically using credit. Rather than acquire several types of credit cards (gas, store and major), apply for one major credit card and only use it for emergencies.
Pay off the balance every month. Carrying a balance on your credit card decreases your credit rating and you’re more likely to max out the account. Pay off your debts in full and keep a low balance to rebuild your score.
Know your due dates. Open credit card statements upon arrival. And if possible, make an immediate payment. You’ll pay fewer interest and alleviate late payments.
Add your name to someone’s credit card. Piggybacking is an effective way to rebuild credit. Ask someone with an excellent credit history (parent, spouse or sibling) to name you as an authorized user on their credit card. The credit card company will issue a card in your name, and report the account to the credit bureaus.
Be patient. Consistency is key to rebuilding credit. Paying your credit cards on time for one or two months isn’t enough to significantly raise your rating. Continue to pay your credit card on time and make wise credit decisions.