Regardless of the reason for our bad credit,
The best time to improve credit
is when you do NOT need it.
Because if you wait till you NEED it..
…it will be TOO LATE to get it.
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Want to buy a new car, want to buy your dream home, then you need to have a good credit history. Otherwise you will get the WORST payment plan and the HIGHEST interest rates allowed by law. But how do you rebuild your credit after a financial setback?
So exactly what are rebuilding credit cards and how can they help me? A rebuilding credit card is a regular Visa or Mastercard
issued by a bank. Since the person applying typically has a history of late payments or other negative entries, they have a poor credit score and are considered a bad risk. In this case the bank requires that you deposit an amount of money equal to the credit limit in a seperate account with them as security. This type of card is referred to as a secured credit card.
As you use the card and make payments each month, the bank reports your payment history to the credit bureaus each month. Over time, if you make your payments on time and keep your balance below 35% of the limit, your credit score will start to go higher and higher. Once you have reached a score of 650 or better, you probably can qualify for a regular unsecured card from the same or different bank. At that time you could close the first account if you wanted to and get your security deposit back.
How do I know if I need to apply for a secured credit card instead of a regular one? If you recently went through a personal bankruptcy like I did last year, then you really have no choice but to apply for a secured card. But if you are totally in the dark about what kind of credit card you should be applying for, you might want to find out your credit score first.
It is possible to get a copy of your credit report each year, but you still have to pay a small fee to check credit scores. Based on your personal credit situation, you may have a good idea already what your score is. But you may want to at least get an estimated score based on your answers to a few questions at no cost. And if your score is less than 650, don’t waste your time with traditional credit cards.
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