Do you have a poor credit rating? Are desperately trying to improve it but keep getting the door slammed in your face every time? Sounds like a familiar scenario.
People that have poor or no credit histories will find it difficult to increase their credit score as creditors are unwilling to lend to irresponsible borrowers. It might seem a little bizarre that in order to improve your credit rating you need to access credit but this is one of the biggest ways that lenders can assess the likelihood you’ll pay it back.
However, there are several ways for improving your credit rating by using specialist credit cards known as credit-builder or ‘bad credit’ credit cards.
Using a credit card does not have to mean sky high monthly bills or insane interest charges. If used properly you will benefit from the boost in your credit rating and won’t get charged an extra penny.
Unfortunately, simply applying for a credit card won’t do much good; you do actually have to use it. The idea is that instead of paying by debit card or cash you use the credit card and this is an indication to lenders that you are able to manage credit responsibly.
Most credit cards offer a 30-60 day interest free period as long as you pay back the amount borrowed in full straight away, you won’t be charged any interest. However, if you need longer to repay the full amount and allow your purchases to slide over to the next month, you will almost certainly be charged interest on the amount you are borrowing.
Build your score
Every month, your payment information is sent to the Credit Reference Agencies (CRAs) such as Experian and Equifax. They use the lender’s reports to create a credit score. If they can see that you are sticking to your agreement and are a reliable borrower who repays at least the minimum amount due on time, then your rating will start to improve.
If you find that your credit card issuer is rewarding you by increasing your credit limit or reducing your APR, you’re hard work is starting to pay off. Rebuilding a credit score is hard work but it can open up the door to other credit, such as a mortgage or loan.