For many people, the mere mention of credit sends a shiver down their backs. The entire concept can be overwhelming and daunting to navigate, and you’ve likely had at least one bad experience when you were just starting to establish credit or realizing you had negative marks on your credit. Still, credit is a part of everyday consumerism these days. Even many cellular carriers routinely check a potential customer’s credit before they’ll issue service.
The good news is that you can make credit work to your advantage. Here are seven simple points to consider as you get your credit house in good order:
1. Use Credit Cards To Repair Or Build Good Credit.
Credit cards, whether through a retailer or directly through a credit card issuer, can help you build a strong credit profile when they’re used correctly. Make sure that you only charge what you can afford to pay and that you make the payments timely.
If you have trouble getting approved for a regular credit card, you can get a secured credit card to help you build or repair your credit. This will require you to put money up. If you pick up a secured card for $300, you will need to put that much up and your credit line will be for that amount. As you carry the card for a year or so and make all required payments on time, then you can go after a normal unsecured card.
Don’t assume that low-limit cards are pointless. The limit isn’t what matters toward your credit. It’s the combination of charge and pay, charge and pay, charge and pay, etc that will positively affect your credit. Over time, a great payment history is built and your limits and abilities will get larger as more and more lending institutions start to carry more confidence in you that you can payback what you spend.
Tip: Try using a credit card for routine purchases that you would have otherwise made with cash, such as for fuel and groceries. Pay the entire amount off within two months and then repeat. This will help to establish you as a reliable, responsible card holder, which will reflect well on your credit score, help repair and build credit, and eventually help you get larger limits for future use.
2. Use Small Loans To Rebuild Credit.
Online payday loans, cash advances, installment loans, and personal loans work great to help you reestablish or build credit. Again, it’s important to remember to only take out loans that you can afford to pay back and to make timely payments, but the important part is that these types of loans establish a positive payment history on your credit, which is the only way to situate yourself to get larger loans when you need them.
3. You Have A Right To Stay Informed.
One of the best aspects of credit is the transparency involved. You have the right to see what any and all creditors are reporting about you. When you order a copy of your credit report, you’ll see the exact same information as a creditor does pulling your credit. AnnualCreditReport.Com is a great resource for you to get involved with.
Tip: If you see anything that you feel is an error, you can submit a request for removal/correction to the main credit bureaus.
4. Avoid The Fees.
Many credit cards come with a host of fees, such as an annual fee just for having the credit card. Some creditors also have sky-high interest rates that will make it difficult to pay balances off. In looking for a credit card, always read the fine print and try to negotiate to remove any fees or unsightly terms. Once you get the credit card, be sure to pay your bill timely and not exceed your credit limit to avoid late and limit fees.
5. Credit Mistakes Will Eventually Leave You Alone.
Mistakes and bad financial circumstances can happen to anyone at any time. The good news is that those mistakes won’t follow you around indefinitely. Negative credit info, such as charge-offs and debt collections, only remain on your credit report for seven years in most cases. After seven years, future creditors do not see that info when they pull your credit history. It seems like a long time away especially if your credit profile is in poor shape now, but if you get started now budgeting correctly and starting to take care of your finances and make your payments on time, its a countdown to a great credit profile. Seven years from now, your profile can look fantastic.
6. You’re Not Alone In Tackling Your Credit.
There are many lenders who specialize in short term cash advances for those with little to poor credit. They’ll help you set yourself up to establish positive credit the right way.
Creditors and lenders do not have complete power over you either. The Fair Credit Reporting Act, for example, is the law that enables you to dispute debts that you feel have been wrongly reported or that aren’t yours to pay. Under The Fair Debt Collection Practices Act, you have the right not to be harassed by debt collectors. CreditKarma is a great resource to help you understand your profile and its free. You can also dispute items you think do not belong. The benefit of disputing items is that if the other side does not respond within 30days, they take it off of your credit!
7. Don’t Be Afraid To Seek Professional Guidance.
Sometimes your debt and state of credit is too big and too complicated to handle on your own. Don’t let this overwhelm or discourage you. Many professional organizations exist to counsel you on the best steps to take for your unique financial situation and needs.
A great credit profile is hard work. It does not happen overnight. When a person walks into a bank, furniture store, car dealership, or making any large purchases and has excellent credit, you get the best rates and terms. It really is a great feeling. However, building a great profile is a great feeling too. Scores start to climb and limits start to go up. Options are a great thing, but before you can have them, you have to start proving your worthiness. Typically this can take 25-30 payments and show your local lender or bank that you can handle debt.