There is an effective way to build upon your personal credit and this is to increase the number of positive accounts that appear on your credit report. This will ensure that your high credit limit (that is, the total amount of credit that you can use) goes up. This is taken as a good sign by potential lenders and you will see the offers coming regularly through your mail. Obviously, your aim is to earn a better level of credit and this is indicated in a higher score on your credit rating.
Unfortunately, as with a number of things in our lives, there is a catch-22. If you are after obtaining good credit, you must already have good credit! Those of us that are fortunate enough to have a high credit rating are inundated with offers of credit cards all the time. But don't despair - there is a way for those of us who have less than fantastic ratings to increase our numbers of credit accounts. This article will give you details about a few methods; the good and the not so good.
Method #1: Secured credit cards.
With this type of card, it is relatively easy to build upon your credit rating, but it has some drawbacks. Whilst in the first instance it is a simple job to obtain approval for the secured credit card, the problem is that they usually need you to put cash up front as a "secured" deposit. As a result, you have money sitting around that you cannot use until you close the account or change the card into an unsecured card once you have built up enough "good" credit. These unsecured credit cards will usually have low credit limits, most likely limited to the deposit amount. Whilst they are not exactly the most efficient way to raise your credit profile, you won't be risking adding to a credit card bill that you cannot possibly pay.
Method #2: Sub-prime merchandise cards.
Basically, this is a card that allows you to use what is known as a "line of credit" that is linked to a particular merchandiser, most typically the one that sold you the card. The majority of your purchases will be either online or through a catalog. Be careful - there are some dubious operators out there, but the good ones can be helpful. Here is an example to show you how it works: You buy $1,000 worth of goods. $300 of this is paid as a cash deposit, with the remaining $700 financed by the sub-prime merchandise card. Your transaction will be reported to one of the credit bureaus and this in turn will increase your credit limit.
These cards are relatively easy to obtain and if you are able to create a good payment history, they will in a short time see you receiving pre-approved offers of credit. Please note: It is all too easy to get confused between these cards and sub-prime credit cards. The latter have extremely low credit limits and come with an exorbitant establishment fee. Be very wary of these!
Method #3: Authorized user accounts.
The practice of establishing a family member or even a close friend on a credit card or equity term that is already in existence as an "authorized user" is a time honored way to build credit. There are some parents who will, to assist their children in establishing credit of their own, add them as authorized users. This is beneficial to the "authorized user" as they are able to share the good credit rating of the card holder. There is, however, a forthcoming change to the way that FICO (Fair Isaac Corporation) rate this type of arrangement. This has come about in response to unscrupulous credit repair organizations that were dealing in the business of selling "authorized user" accounts to a number of people who were experiencing credit difficulties. As a result of this illegal practice, the loophole is due to be closed and so there is no real advantage in making this sort of arrangement especially if you are planning to consolidate debt.
Building upon your credit is absolutely worthwhile. It makes sense to begin with one or two accounts, gradually building your credit and making sure that your payments are made on time. You will be rewarded with an excellent credit rating.
Unfortunately, as with a number of things in our lives, there is a catch-22. If you are after obtaining good credit, you must already have good credit! Those of us that are fortunate enough to have a high credit rating are inundated with offers of credit cards all the time. But don't despair - there is a way for those of us who have less than fantastic ratings to increase our numbers of credit accounts. This article will give you details about a few methods; the good and the not so good.
Method #1: Secured credit cards.
With this type of card, it is relatively easy to build upon your credit rating, but it has some drawbacks. Whilst in the first instance it is a simple job to obtain approval for the secured credit card, the problem is that they usually need you to put cash up front as a "secured" deposit. As a result, you have money sitting around that you cannot use until you close the account or change the card into an unsecured card once you have built up enough "good" credit. These unsecured credit cards will usually have low credit limits, most likely limited to the deposit amount. Whilst they are not exactly the most efficient way to raise your credit profile, you won't be risking adding to a credit card bill that you cannot possibly pay.
Method #2: Sub-prime merchandise cards.
Basically, this is a card that allows you to use what is known as a "line of credit" that is linked to a particular merchandiser, most typically the one that sold you the card. The majority of your purchases will be either online or through a catalog. Be careful - there are some dubious operators out there, but the good ones can be helpful. Here is an example to show you how it works: You buy $1,000 worth of goods. $300 of this is paid as a cash deposit, with the remaining $700 financed by the sub-prime merchandise card. Your transaction will be reported to one of the credit bureaus and this in turn will increase your credit limit.
These cards are relatively easy to obtain and if you are able to create a good payment history, they will in a short time see you receiving pre-approved offers of credit. Please note: It is all too easy to get confused between these cards and sub-prime credit cards. The latter have extremely low credit limits and come with an exorbitant establishment fee. Be very wary of these!
Method #3: Authorized user accounts.
The practice of establishing a family member or even a close friend on a credit card or equity term that is already in existence as an "authorized user" is a time honored way to build credit. There are some parents who will, to assist their children in establishing credit of their own, add them as authorized users. This is beneficial to the "authorized user" as they are able to share the good credit rating of the card holder. There is, however, a forthcoming change to the way that FICO (Fair Isaac Corporation) rate this type of arrangement. This has come about in response to unscrupulous credit repair organizations that were dealing in the business of selling "authorized user" accounts to a number of people who were experiencing credit difficulties. As a result of this illegal practice, the loophole is due to be closed and so there is no real advantage in making this sort of arrangement especially if you are planning to consolidate debt.
Building upon your credit is absolutely worthwhile. It makes sense to begin with one or two accounts, gradually building your credit and making sure that your payments are made on time. You will be rewarded with an excellent credit rating.
About the Author:
Find out more as Darren Cason shares his experiences on personal finance, budgeting, debt, credit and money at www.debtjerk.com. Seeking assistance on consolidate debt with equity.
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