credit cards to build credit
Credit Cards to Build Credit
If you are stuck with a low credit score, then using credit cards can get your credit report inline. Here, the process of obtaining such credit cards and using them to improve one's credit score has been described.
- A credit card to build credit should have a very good APR. The annual percentage rate needs to be very stable and reasonable, look for a plan that has an APR between 7% to 15%. The smaller the range, the lesser would be your expenditure. A fixed APR or a zero APR will also be great, as your expenditure on interest would reduce down.
- Secondly, you will also have to make sure that the late fine and the additional APR in cash transfers or other fees are small.
- In the credit card offer you will have the names of the credit reporting agencies to which the credit card company reports. Ideally, the credit card company that you choose should report to all the major credit reporting agencies, that include Equifax, Experian and TransUnion. These cards which are used to build credit score often report to minor credit reporting agencies.
- A prepaid credit card will also severe the purpose but putting the prepaid card as the last option is a wiser choice.
- Get the credit limit of the card that is at least 25% lesser than your monthly income. Your APR should also be preferably included in the prescribed 25%.
- The second thing that you can do is plan out your expenditure for the month and then spend it through the credit card. Make sure that you leave a margin of about 30% or 20%, of your credit limit. This expenditure should be as consistent as possible. For example, you can get all your groceries and medical supplies, through this card.
- These expenditures can also include the ones that can be directly deducted from the credit card such as electricity bill, water bill, newspaper payments, etc.
- Create a separate savings account in the bank at the start of every month, put in an amount that is equivalent to the credit limit. Once done, do not touch this amount and make the payment instantly, as soon as you get the credit card bill.