The three digits that compose your credit score may seem arbitrary to some, but low credit scores can be detrimental to your financial future. Although creating a perfect credit score takes years of patience and acceptable spending habits, there are five smart decisions all consumers must make to not only establish credit, but rebuild this three-digit score into a solid financial backbone essential for buying a house (see here) or securing any other type of loan.
Decision #1 - Open a Credit Card Account
For some, the idea of opening a new line of credit in the form of credit cards may seem like a bad idea. If you've had issues with credit card bills in the past, the desire to avoid plastic debt may be strong; however, since 30-percent of your overall credit score is based upon payment history, opening and maintaining a healthy credit card account is essential to increase your credit score.
Does your bad credit prevent you from obtaining a traditional credit card? While credit cards are essential, some are unable to obtain this paramount financial element. If your credit is too low to qualify for traditional, or unsecured, credit cards, apply for a secured credit card. Secured credit cards report to all three credit bureaus, which can dramatically increase your credit score if all reports are positive. While there are a multitude of unsecured credit card options, all require an initial deposit to secure your credit limit. This deposit, typically $300 to $500, is used as collateral in case you default on payments. Unlike prepaid cards, when you charge items the total is not deducted from the security deposit. After 12 to 18-months of on-time payments, your credit score will feature a significant boost while simultaneously qualifying you for low-interest secured credit cards.
Decision #2: Spend Carefully
Swiping a piece of plastic in return for services or items an alluring option for many consumers. While credit cards simplify the means of making a payment, excessive spending (even when payments are made on-time) can prove detrimental to a budding credit score. Utilize your credit card for emergency purchases, not for daily expenditures such as gasoline or groceries. Strive to only use 30-percent of your credit limit and pay off your balance as often as you can. Keeping a tight leash on your credit card usage can prevent overspending and reduce the likelihood of defaulting on payments.
Decision #3: Proactively Monitor Your Credit Report
While you may have made financial mistakes in the past, these negative remarks should be tended to once the creditor or collection agency has been satisfied. Be proactive with the health of your credit score by disputing negative remarks. Contact the creditor by writing, stating your desire to eliminate these negative remarks. Even if you have an outstanding balance, use this as leverage in negotiations. For example, agree to pay 75% of your total balance in-full if the negative marks are completely removed from your credit report. Check out credit card monitoring services here.
Decision #1 - Open a Credit Card Account
For some, the idea of opening a new line of credit in the form of credit cards may seem like a bad idea. If you've had issues with credit card bills in the past, the desire to avoid plastic debt may be strong; however, since 30-percent of your overall credit score is based upon payment history, opening and maintaining a healthy credit card account is essential to increase your credit score.
Does your bad credit prevent you from obtaining a traditional credit card? While credit cards are essential, some are unable to obtain this paramount financial element. If your credit is too low to qualify for traditional, or unsecured, credit cards, apply for a secured credit card. Secured credit cards report to all three credit bureaus, which can dramatically increase your credit score if all reports are positive. While there are a multitude of unsecured credit card options, all require an initial deposit to secure your credit limit. This deposit, typically $300 to $500, is used as collateral in case you default on payments. Unlike prepaid cards, when you charge items the total is not deducted from the security deposit. After 12 to 18-months of on-time payments, your credit score will feature a significant boost while simultaneously qualifying you for low-interest secured credit cards.
Decision #2: Spend Carefully
Swiping a piece of plastic in return for services or items an alluring option for many consumers. While credit cards simplify the means of making a payment, excessive spending (even when payments are made on-time) can prove detrimental to a budding credit score. Utilize your credit card for emergency purchases, not for daily expenditures such as gasoline or groceries. Strive to only use 30-percent of your credit limit and pay off your balance as often as you can. Keeping a tight leash on your credit card usage can prevent overspending and reduce the likelihood of defaulting on payments.
Decision #3: Proactively Monitor Your Credit Report
While you may have made financial mistakes in the past, these negative remarks should be tended to once the creditor or collection agency has been satisfied. Be proactive with the health of your credit score by disputing negative remarks. Contact the creditor by writing, stating your desire to eliminate these negative remarks. Even if you have an outstanding balance, use this as leverage in negotiations. For example, agree to pay 75% of your total balance in-full if the negative marks are completely removed from your credit report. Check out credit card monitoring services here.