Money plays an important role in our life and therefore we must make sure that we have the right mindset to handle our finances. Millions around the world are not really sure about how to do that and they are more focused on their responsibilities than on how they can plan their budget. This is where they go wrong and end up on a bad note having bad credit history that eventually leads to bigger issues in the future. Bad credit does not kill you for sure, but it does not provide you with the opportunity to have lower insurance premiums and does not save you from the embarrassment of having your job application denied on the basis of your poor credit history.
Building a good credit sounds like an impossible task for some people, but it is not really a tough job at hand. To start with you need to be discipline and you should know how to plan your budget in the right way. If you can do that you will see that over a period of time you have managed to build good credit and make things easier and better. One of the reasons why many people have bad credit history is because they have over-used their credit cards. However, you can still make use of secured credit card to change things over and ensure that your credit history is clean and banks offer you with better premium rates and options in the future.
Understanding a Secured Credit Card
A secured credit card works like any other credit card except that you have to put down a security deposit. This is somewhere around $300 to $500 and you obviously pay back all the money you borrow from the bank. However, secured credit card is not a debit card, because although you are still putting a security deposit your credit card activity will be reported to the credit card bureaus. However, this is where you can make some changes and take advantage of the situation and change your bad credit history into something better.
The reasons why you pick secured credit card to build credit is to show the bureau that you have the capability to borrow and pay back the money. Hence, you need to show that you are spending wisely and in limits. Make sure that you are not spending more than what you have and that way you will never let yourself in trouble. If you don’t use your credit card you are sending a wrong signal to the bureau that you are incapable of borrowing and paying back. Make small purchases of around 50% of what you have and pay it back on time.
Pay On Time
It is important that you pay back all the money on time and there should be no exception about it. There are no two ways about it because the lenders are always searching for borrowers that can pay back on time. Hence, no matter how small or big the amount is you have to get into the habit of paying on time. One late payment can damage your credit score significantly and bring you back to where you started from. Keep track of when you need to make payments and make arrangements for it in advance so that you never miss out any payment dates.
Avoid Multiple Accounts
Too many accounts are not good for building credit and that gives a feeling to the bureau that you are always asking for money from multiple banks and that is going to bring ill reputation to your credit score. Hence, make sure that you stick to one bank account and not just keep opening up new accounts that can impact your credit history.
Monitor Your Progress
Most people that have bad credit have never checked their credit history or score and therefore they are not sure where they stand in terms of credit score. You can apply for credit report and score and keep track of it that will help you to know where you stand and how much you need to improve. Once you have a better idea of your credit score you will be able to make better decisions.