As the name indicates, “build credit” credit cards help customers suffering from poor or no credit history, build credit rating. It is difficult to pinpoint one specific “build credit” credit card as the best. However, if you are just starting out and do not have any credit history, or have missed a few previous payments, you will find many viable credit cards that help rebuild your credit score.
Use the FREE credit card finder to pick the best “build credit” credit card to restore or build your credit rating today!
As banks become more stringent about lending standards and frequently reject applications from customers with poor or no credit history, “build credit” credit cards is a welcomed tool for credit repair. But you must be aware that “build credit” credit cards are either secured, have higher interest rates or have low credit limits.
Why do you need to raise your credit rating?
According to MSN Money, the poor economy has pushed banks to consider credit scores as a means of judging your creditworthiness. A low credit score or no credit history usually translates to denied credit card applications and loans, as well as much higher interest rates.
Additionally, credit ratings are used for more than just getting loans and credit. MSN Money lists the following uses of credit history:
- Landlords check credit history before renting
- Insurance companies use credit rating to set premiums
- Employers ask for credit history before hiring
How is your credit rating determined?
According to myFICO, most lenders use FICO scores to determine creditworthiness. All consumers have three scores given by three separate and independent credit agencies: Equifax, Experian, and TransUnion.
Each score is derived from your financial information that is kept on file at the credit bureaus. This includes your history of payment, debt-to-income ratio, number of accounts you hold, enquiries about your credit history among others. Your FICO scores allow banks and businesses to determine the amount of credit or loan they can extend to you as well as the interest rates you will be charged.
In other words, FICO scores or your credit scores are very important numbers that impact various aspects of your life.
What are the advantages of getting a “build credit” credit card?
These credit builder credit cards are expressly offered to customers with poor or no credit history. In other words, these cards are easier to get irrespective of your financial past.
These “build credit” credit cards are meant to showcase your sense of financial responsibility. So if you pay off your credit card debt in full and on time, you will slowly and steadily build up your credit score. This will make it easier for you to secure future loans and credit at lower interest rates.
Additionally, you will have the convenience of being able to use a credit card to make payments with different businesses and vendors.
What are the terms for getting a “build credit” credit card?
The terms vary depending on the credit card company. In most cases, high-risk customers will be offered a secured credit card, wherein you are required to make a security deposit that will determine your credit limit. This is usually starts at $100 and can go up to $2,000.
Most secured credit cards have annual fees associated with their use. This varies between $30 – $100. “Build credit” credit cards come with high interest rates that could be up to 25% APR and more.
What should you be wary of while using “build credit” credit cards?
As you embark on your credit building or re-building exercise, remember to research your options thoroughly. You must understand all the terms and conditions before you sign up for any “build credit” credit card.
Never pay any application fees. Some credit card companies can charge up to $250. You will find established credit card companies that do not require such payment.
Do not assume that the credit card companies will report your transaction details and payment history to the three credit agencies. Make sure that the reports are being submitted by regularly checking your credit report.
Using “build credit” credit cards, how long will it take to restore or build your credit rating?
This depends on your present credit score and credit history. It is important to remember that credit building does not happen in an instant. Depending on your present score, it could take years to build good credit rating.
If you maintain financial accountability while using your “build credit” credit card by making payments on time and in full, you will see a slow and steady increase in your FICO scores. This will allow you to borrow more at better terms, as time goes by.
How can you get the best “build credit” credit card?
In spite of the poor economy leading to tighter lending standards, you will find plenty of credit card offers that promise to rebuild your poor credit scores. Understanding the terms and conditions, and reading the fine print can make choosing the right credit card a difficult process.
Fortunately, you can compare rates and terms of credit cards online using the FREE credit card chaser and take your first step towards excellent credit scores!