The vast majority of people in America are perfectly description to live a good life and pay off their bills at the end of the month. Unfortunately, circumstances dictate that life really cannot be that simple, and sometimes you have to purchase big ticket items like a lawnmower or even a house, and therefore you need extra funds. According to the big three credit bureaus, approximately 40 million Americans have a poor credit rating. This sobering statistic indicates not only how easy it is to fall into debt but also how difficult it can be to build credit, especially after it has been rated poorly.
Why Build Credit?
There are many reasons why you need to build credit as well as possible. Before you can get a personal loan, a business loan, can buy a car or a home, you need to have a decent credit score. Your credit score will reflect all of the loans you have taken out, from credit cards to car payments, and reflects the efforts you have made to pay off those debts. If you have had a spotty history of repaying debt, you get a lower score and lenders will be much more reluctant to advance money to you in the future.
When trying to build credit, whether you have none at all or just have poor credit, it is important that you stay consistent in your efforts to repay any outstanding debt. Look over all of your outstanding debts, take note of the amounts, and make a new effort to make monthly payments until you are all caught up. This will help you build credit tremendously, although it is going to take some time. If you need to immediately build up credit, you might have to consider contacting a loan consolidation company that can deal with creditors and arrange for you to just have one monthly payment.
How Credit Cards Help
Credit cards are an excellent way to build credit, despite the dire warnings that most people hear about using plastic. Credit cards can be used to purchase small ticket items and when you make prompt and full payments each month on that small purchase, it reflects positively on your credit history, and over time, can help negate your negative rating. However, it is important that you recognize that your credit card is a tool to build up your credit and not permission to go on wild shopping sprees each month.
When choosing the right credit card to help you build credit, you need to look over the annual fees, the interest rates and any penalties for early repayment. Essentially, look over the fine print carefully and compare among several different companies until you find one that will help you build credit and not sink you further into debt. Also, some credit card offers may only include a temporary solution, especially if the fees or interest rates will change after the introductory period. It is important that you choose your options very carefully to help you master your finances and get a better credit score.
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