Rebuild Your Credit Score With Credit Building Credit Cards
Sometimes you just need a "do over" and credit building credit cards can provide that much needed second chance
When many people think about needing to apply for credit building credit cards, they don't think it's a situation they will ever find themselves in. After all, they think to themselves, I'm a responsible person. I pay my bills on time. My credit rating will always be perfect!
Well, as many people have found out over the course of the economic crisis that our country has faced and is still facing, being a responsible person is not enough to guarantee that you will never face financial hardship. No, things often come into play which take you by surprise, and before you know it, your credit rating is shot.
So, what should you do about that? Sit around and feel sad and depressed and lethargic because you lost something that was important to you, and your life is more difficult now? Well, sure, there is some grieving involved, and plenty of frustration. But once you've let yourself experience that, it's time to make a plan that will mitigate all the negative things that have happened in your life and in your financial situation, and let you move back to a place where you are fully in control, not only of your finances but of your entire life.
So the question becomes, how do you achieve that? It almost seems like a vicious cycle. In order to rebuild your credit rating, you need to use credit responsibly in order to illustrate that you are in a different place in your life now and can be trusted with credit. However, a cruel trick is, then in order to be given the responsibility of credit, you need to already have a good credit rating. This can be incredibly frustrating.
The good thing is, there are ways to get your foot in the door of credit repair without already having a good credit rating. One of these is by utilizing credit rebuilding credit cards. These cards are issued to people with low credit ratings that are a bad credit risk, and that most mainstream credit card issuing entities will not issue cards to. Most people use these cards in order to rebuild their credit, that is the whole reason for getting them.
They usually have a limit that is restrictively low, normally under $300. In this way there is very little risk to the lender of losing a lot of money in case it turns out that you don't repay the balance charged on the card, but it's actually a nice safety net for the user as well. There is no way that you can wake up one morning and find out that you have succumbed to the temptation of charging thousands of dollars on your card -- it simply can't happen.
Another way that these cards are not exactly ideal for the mainstream consumer is that many times they are secured, which means that you have to put down a deposit -- many times in an amount equal to the amount that you will be charging to the card -- before you can begin making credit charges to the account. Again, this is to mitigate the risk of the lender. And although it may seem pointless to get a credit card where you are only charging up to an amount that you already had in the bank, remember the point of this credit building credit card is simply to recoup your credit score -- nothing more, nothing less. It's important to keep that goal in mind at all times, otherwise you may become frustrated with the restrictions you will experience on the card, which will likely be more significant than what you would have experienced in the past with other credit accounts.
Lastly, these accounts will very often have prohibitively high interest rates. Because of this, it is merely another incentive to repay the balance on the card in its entirety each and every month. In this way, you will never need to experience the negative effects of the very high interest rate, and additionally you will be making great payments every single month, on time, and these payments will be reported to the credit bureaus. Every single timely payment that you make on the high risk credit card that you've been approved for is a good mark on your credit score, showing that you are ever more trustworthy, and raising that numerical score little by little, bit by bit.
Now that you have heard all about the drawbacks of credit rebuilding credit cards, it's good to know about some of the benefits as well.
First of all, because of the fact that the risk is so low to the lender, they are quite a bit easier to get approved for than other types of credit cards. In fact, if your credit is bad enough, these will likely be the only types of credit cards that you will have a hope of being approved for. Still, it is great that you actually can be approved for any type of credit card with credit ratings that low, because using a credit card is exactly what you need to do in order to raise those ratings. The more you use the card responsibly, the better your chance of being approved for a credit account in the future that has much more desirable terms. It's all up to you.
Secondly, these credit rebuilding credit cards are a way to re-acclimate yourself into the world of using credit responsibly. You can start small with them. Charge little things like a tank of gas or your weekly groceries, things are already worked into your budget as "needing to be paid."
Every time you make a charge, mark it down in a list. Whether you keep track of it in a database on your computer, a program such as Quicken, and app on your smart phone, or even just a list in a small notebook that you carry with you -- absolutely do not put a charge on the card that you do not record and keep track of. You need to keep a running total of what you have charged, and make sure that you have the cash on hand to back up that charge so you can pay down the balance at the end of the month.
After several months of using your credit rebuilding credit cards responsibly in this way, you will be surprised and delighted at the amazing effects that activity has on your credit score.