If your lack of credit or poor credit is working against you, then keep reading to learn how to boost your credit score.
Hey, you! What’s your credit score?
Are you looking to build your credit history for the first time? Or are you seeking to improve your existing credit history damaged by past financial woes? Though it’s not a one-size fits all strategy, you may want to consider using a secured credit card.
Disclosure: This article is not intended to give any tax, investment, or financial advice of any kind. Everyone’s situation is unique, therefore seek professional advice from your CPA, financial adviser, and or lawyer.
A secured credit card differs from a regular (unsecured) credit card in that secured cards require a security deposit by the cardholder. Say you wanted to start with $250. Your line of credit would then be $250 which functions as cash collateral against you defaulting on your payments. In other words, the secured card works like a debit card yet functions like a credit card. Some card providers will even give you a credit line higher than the amount of the security deposit, based on your credit history.
From experience, a secured credit card is a great vehicle to help build or rebuild your credit history. However, how things progress after getting a secured credit card will depend heavily on each person. A person with no credit history [no negative information, just lack of positive information], can see their credit score increase in as little as six months. And a person with poor credit history can see their credit score increase significantly in about one year.
Key things to note if trying to boost your credit with a secured credit card
- While past credit history will play a major role, responsible regular use and diligence will make a significant difference in helping you earn good credit standing. The trick is to use your card to make small purchases like groceries or gas and steer clear of purchases you cannot afford.
- Being credit-worthy means making at least the monthly minimum payment — this may be greater than 3% or $25. Better yet, pay the full outstanding balance every month. No matter which option you choose always make payments on time and never miss a payment.
- Another factor that will play a role in your ‘credit utilization ratio’ or how much of the available credit you are using. Ideally, to maximize and boost your credit score, you will want to maintain a 30% or less ratio.
How to Select a Secured Credit Card
Not all secured cards are created equal.
A secured credit card can be a very powerful tool to prove yourself and help boost your credit score. However, do keep in my mind that secured cards like regular credit cards, come with fees of all kinds. Therefore, you’ll want to choose one that has no application fee and very low or no annual fees.
Also, don’t make the mistake of assuming that every trade line is reported to all three bureaus. Inquire to ensure the one you choose reports to all three credit bureaus. Capital One is a great place to start, as they offer secured cards with flexibility and convenience to suit your needs and lifestyle.
If a secured credit card is not your thing, Capital One has options for credit builder options for people with a not-so-great credit score. They even give you a chance to see if you are pre-approved before you even apply.
See what Capital One credit card you qualify for with no impact to your credit.