Credit Building Cards
Rebuilding & Establishing new credit is a vital part of our credit restoration process. One of the best ways to do this is via a Secured Credit Card.
A secured credit card looks and acts as a regular credit card except… you’ll be required to put down a security deposit (ranging from $300 – $2000). This security deposit amount is equal to your credit limit; it acts as a ‘security’ in the event you are not able to make your payments. Therefore, the amount of your security deposit will always remain the same; while the credit you have been extended on your secured credit card will fluctuate based on usage.
This is not a debit card; you are still being issued credit from a bank. Further; your spending activity is NOT reported to the credit bureaus with a debit card. Your spending activity IS reported to the credit bureaus with a secured credit card. Thus, your score can increase with positive payment history and usage; and can decrease with poor payment history and poor usage.
Best Practices for Success In Building Your Credit:
- Pay On Time! Better yet; pay off every month in full; it increases your score faster
- Only use between 5-30% of your approved amount. For example if you have put down $300; you only want to spend $15-$90 per month. KEEPING BALANCES LOW IS VERY IMPORTANT. Pay off before or on the due date. Before is best, however at the very least pay on time – no exceptions!
- Increase your security deposit if you can; this will increase your credit limit. This does not mean you need to increase your spending! Keeping balances low is very important; increasing your credit limit is just as important because it positively affects your utilization rate; which makes up 30% of your credit score.
- Try to select cards that give you the option of turning it into a Unsecured Credit Card after a certain amount of on-time payments. Let’s face it; interest rates are high on secured credit cards; being able to switch over to an unsecured card as soon as possible will save you a lot of money over time in interest fees.
(Note: If you have a recent bankruptcy, please stick with the first option above).
Merchant Credit Building Cards
Have high credit balances?
Merchant cards are a great way to build credit. They are very easy to get approved for and have high credit approval limits, which is great for those that need to improve their credit-to-debt utilization or who need to mix their credit up a bit. My clients have seen their debt ratios go from 86% to 44% with one merchant card approval. This results in a nice credit boost, that allows them to pay off their credit more cheaply.
Merchant cards can only be used at one store, which is typically the company issuing the card.
These are considered ‘gateway’ cards; meaning you should not plan on keeping them for a long length of time, but to merely open the doors to better forms of credit with proper usage.
Below is a Merchant Account that I’ve personally used to soar my client’s credit scores:
Online Jewelry Store – Up to $5000 Credit Limit, minimal approval guidelines (reports to all 3 credit bureaus)
Online Consumer Goods Store – Up to $5000 Credit Limit, minimal approval guidelines (reports to all 3 credit bureaus)
Hutton Chase – Up to $1500 Credit Limit, Minimal approval guidelines (reports to Equifax & Transunion only)