You Can Improve Your Credit With Credit – But Be Careful
Sometimes, the only way to improve your credit is to get a new credit card and use it responsibly. Yet, one of the worst things you can do when you have bad credit is to apply for more credit cards.
However, there is some debt you shouldn’t let get out of hand. Like credit card debt. The average American family has over $15,500 in credit card debts. Runaway credit card debt can have lasting consequences that will affect your family’s financial security in the long run. It could, potentially, make the bad credit hole you are in much deeper. However, there is a way to do it.
Keep Hard Inquiries Down
A hard inquiry occurs when a lender checks your credit history to assess creditworthiness. These inquiries are attached to your credit scores, essentially leaving a record of all the places you’ve applied for credit. Depending on the number of inquiries you end up with, your overall credit score can decrease – approximately five points, or more, per hard inquiry.
Keep in mind that potential lenders can view the credit cards and loans you’ve applied for. If you apply for multiple credit offers with a bad credit score in a short period, you’ll appear desperate, and ultimately, a higher risk of default. If you have a poor credit score, approval is unlikely, so be careful of making things worse by racking up a bunch of unnecessary applications.
Monitor Your FICO Score
Your FICO credit score is always assessed when you apply for a mortgage, a loan or credit. Credit card issuers use this metric, which runs from 300 to 850, to judge financial risk. The higher your score, the better your chances of approval. Any score between 570 and 500 is considered poor or bad credit. If your score is bad to start with, don’t make it worse with numerous and futile applications for credit. But also, keep an eye on it so you can see where you’ve made improvements.
Apply for Secured Credit Cards
The best way to apply for a credit card, when you have bad credit, is to apply for a secured credit card. An unsecured credit card loans money from the issuer at interest. A secured credit card has a credit line that is backed by your security deposit. For example, if you want a $200 credit limit, you pay a $200 security deposit. Secured cards are designed to help those with bad credit rehabilitate their credit scores.
A good secured credit card reports card activity to all three major credit monitoring bureaus. These bureaus include Experian, Equifax, and TransUnion. That way, you can improve your credit score faster. Most are secured credit card applications are pre-qualified and don’t require a credit check. A soft inquiry may be performed to check basic information, in which your credit score won’t be affected. If it does require a hard inquiry, you have a better chance of approval, which limits the number of applications on your credit report.
Credit Score Rehab Takes Time
Save money. Apply for pre-qualified, no credit check, or secured credit cards. Keep in mind that it takes time to repair a bad credit history. However, with secured credit cards, you can rehab your credit score with prolonged, responsible credit activity. It won’t happen overnight, but you’ll be on your way to a better credit score.