Building Credit from the Ground Up
When getting approved for a credit card, a lot is determined by your credit score. In order to have a robust credit score, you need to have a history of borrowing on credit and making on-time payments, these on-time payments are reported to the three main credit bureaus who then determine your credit store. If you are a responsible credit card holder, you really can have it all. But borrowing on credit is a slippery slope and building a solid credit score from nothing can seem like an impossible task. Credit cards are a popular way to build credit because they are widely available and free. That is, if you do it properly. Credit card debt continues to devastate Americans, with 40 percent of U.S. households carrying an average credit card balance of $5,700. But there’s are a whole host of ways to build credit responsibly without landing yourself in debt. If you’re building towards a financial goal that relies on credit like a mortgage or another type of loan, your credit score could be the only thing standing in the way of your financial future.
Secured Credit Cards
If you have bad or low credit, many cards available to you on the market will have crazy interest rates and super-low credit limits. Enter the secured credit card. Secured credit cards are a great way to build credit if you have a low or bad credit. If you have a secured credit card, you are required to make a security deposit which you use to fund your credit limit. It’s like a debit card in a credit card outfit. Secured credit cards are easy to obtain because they present absolutely no risk to the credit card company. If you use your secured credit card responsibly for 12 months, oftentimes your card converts into a standard credit card, and you have a higher credit score to show for it. Slow and steady wins the race.
Pre-Qualified Credit Cards
Many of the main credit card issuers offer pre-qualification or pre-approval card options on their websites. Think of these offers as an “invitation” to apply. It’s usually easier to get approved for these cards, but there’s still no guarantee you’ll ultimately get approved. If you’re looking into your pre-qualified options, shop around on different credit card issuer websites, input your information (credit score, income) and see if the credit card company has any lines of credit to offer you. One of the best things about pre-qualified credit cards is that they don’t require a hard credit pull to see your offers—so exploring this option won’t affect your credit score.
Let your Situation Be Your Guide
Are you paying off student loans? Are you a small business owner? Are you looking to transfer your credit card balance? There’s a card for you. There are dozens of credit cards on the market right now that are being marketed to borrowers in a wide range of specific financial situations. See if you qualify for a specialty credit card and take advantage of the perks and benefits. If you’re a student looking to establish credit, a shiny new credit card could be one of the greatest financial teachers there is. Swipe with caution and your credit score will thank you!