Easy Steps for Building or Rebuilding Credit (Part 2)

This is the second in a series of tips from Jen Gantzer, a student at National University of Health Sciences. Before joining the chiropractic world, Jen worked in mortgage banking where credit scores make a big difference in lending. Her tips are based on insights from her 8 year career in that field. Thanks, Jen, for sharing your expertise with us.

Posted in Money & Credit on Tuesday, May 24, 2016

Mistakes and bad things happen to good people. That is an unfortunate part of life.  But what happens when your credit takes a hit? You have options.

I discussed in a previous blog about the need to maintain both revolving and fixed accounts to manage your credit standing.  We started discussing revolving accounts, particularly looking at credit cards.  While this is the most common revolving fund, all credit cards are not created equal. We looked at the “traditional” credit card -- one that does not include backing it with your own money.

The non-secured credit cards are typically good vehicles for building or rebuilding credit, but for some with poor credit they are not option.  However, there is still an option – the secured credit card.  This type of a credit card is issued based on the amount of money you are willing or able to back with your own funds.

For example, you send in $500 of your own money, they issue you a credit card with a $500 balance. Each month, you still pay off the balance, and the issuer keeps your $500 as collateral just in case you cannot pay. This is a great way to get a revolving account for those with no credit and bad credit. A secured credit card amount varies between $250 and max $3,000.

As we discussed with non-secured cards, there are some factors to pay attention to, particularly grace periods.  There are financial institutions that will not provide you with a grace period. In fact, they will charge you interest on your purchases each month no matter whether you pay the balance in full.

Here are a few links for secured credit cards:

http://www.bankrate.com/finance/credit-cards/10-questions-before-getting-a-secured-credit-card-1.aspx

http://www.creditcards.com/secured-credit-cards.php

https://onlineaccountservices.appliedbank.com/appStatus.do

You will also want to ask your local banks and credit unions if they have secured credit cards. They usually also offer secured business credit cards for those who can’t get a business credit card. This is a great way to establish a banker relationship when a business loan application is part of your future plans.

So that’s how to establish revolving credit.  Next we’ll look at fixed credit and how you can build and rebuild your credit standing with those type of accounts.