How to Build (new) or Rebuild (existing) Credit

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Mastering the Basics  One of the keys to mastering personal finance, is to learn how to establish and maintain an above average FICO Score. I speak more about FICO scores in the course on Understanding Your Credit.

Let’s face it, if your credit is less than perfect, or you have no credit at all, life can be downright depressing. “How can you get credit when no bank will approve it because you don’t have any?!” I hear this a lot from the youth I mentor. I know and understand it’s difficult; however, there are ways to get over this obstacle in life. The first step is to apply for a secured credit card. Now, most of the card companies will want you to have some source of verifiable income, make a deposit into a savings account as collateral,pay an annual fee, and may check your credit qualifications–don’t worry about it. Make sure to read the fine print and pick the one that gives you the lowest interest rate for you to work with. I’ll list links from a credit expert for review on three level credit card companies at the bottom of this blog post.

I remember twenty years ago, the new credit card companies had people literally chasing you around campus to take their applications and apply for their high interest cards. I believe the universities may have banned that aggressive practice now. Back then I heard horror stories and was always angry about being declined for a credit card because of no or little credit history when they were at my campus offering applications left and right. It seemed like they were setting you up for failure and disappointment. You can imagine once I got approved for my first credit card how happy I was even though I didn’t have a clue about an APR or FICO score. I only knew that I had to pay on time every month to keep the card open and get a limit increase. I used the card(s), most of them department store credit cards like JCPenney, Sears, mail order catalogs like Fingerhut, and always kept a balance on them. I didn’t receive my first major bank credit card until I started working for one. (Go figure… 🙂 ) Having a credit card is a good thing, if used properly and will come in handy in establishing a credit history and/or rebuilding one. A credit card is not the same as a debit/check card, although both can be used for (POS) purchases. Practically every company requires a major credit card before they let you get a rental car or a hotel room. Of course back then they had very stringent rules and would never accept a debit card at rental locations. Now, a debit/check card linked to a checking account is acceptable; but be prepared to have them place a deposit hold from $350.00 to $500.00 dollars until you return their rental vehicle or for incidentals before you check out of their hotel room. Yes, there are some places that will take cash only; however, once your money is gone and you aren’t happy with the service, there’s not much you can do but complain or give a bad survey.

So as promised, here’s the list from Beverly Harzog to build or rebuild your credit history, the ones I picked are companies that report to all the CRA’s as “secured” instead of “unsecured” credit, which will help to establish your credit faster, if you qualify:

#1: Wells Fargo Secured Card

You get a variable rate of 18.99 percent. The annual fee is $25 per year. If you use the card responsibly, you’ll be considered for an unsecured credit card.

Credit bureaus: Reports as secured.

#2: BankAmericard Secured Visa Credit Card

You get a variable rate of 20.24 percent. The annual fee is $39 per year. If you use the card responsibly, you’ll be considered for an unsecured credit card.

Credit bureaus: Reports as secured.

#3: U.S. Bank Secured Visa Card

You get a variable rate of 18.99 percent. The annual fee is $29 per year. Some readers have reported that they graduated to an unsecured credit card from U.S. Bank after 12 months, but in many cases, they had to initiate the phone call and ask.

Credit bureaus: Reports as secured.

#4: Citi Secured Mastercard

You get a variable rate of 21.99 percent. The annual fee is $25 per year. You no longer have to apply in person at a branch. You can now apply for it online. If you have a history of bankruptcy within the past two years, you will not be approved.

Credit bureaus: Reports as secured.

#5: DCU Visa Paltinum Secured Credit Card

You get a variable rate of 11.50 percent. Not bad! There’s no annual fee. After your credit history and score improve, you’ll be considered for an unsecured credit card. But there’s not a set time table for that.

Credit bureaus: Reports as secured.

#6: AeroMexico Visa Secured Card

This card is also issued by U.S. Bank. I don’t usually rank a branded card this high, but the APR is a variable 16.24 percent. The annual fee is $25, but waived for the first year. And you actually get rewards.

Credit bureaus: Reports as secured.

#7: Harley-Davidson Visa Secured Credit Card

Here’s another card issued by U.S. Bank. Even if you aren’t a biker, you might like this card. The APR is a variable 22.99 percent. The annual fee is zero. Don’t carry a balance and the cost of this card is zero.

Credit bureaus: Reports as secured.

#8: First National Bank Secured Visa Card Review

This card is issued by First Bankcard, which is a division of the First National Bank of Omaha. You get a variable 17.99 percent APR and you earn a little interest on your deposit. Moving to an unsecured card in a year or so is a possibility.

#9: Union Bank Secured Visa Card

You get a variable APR of 17.99 percent, which is a pretty good rate for this category. The annual fee is $19. The issuer has told me that if you use the card responsibly, you might be able to graduate to an unsecured credit card with Union Bank.

Credit bureaus: Reports as secured.

Remember, read the fine print and make the best selection for your current needs and only use these sources until you are able to get your FICO score where it allows you to have a lower APR.

If you minimize your credit card spending and pay off your balance in full and on time, you’ll eventually become eligible for an unsecured card and escape the bad credit trap.

Until next time…

Peace and Prosperity,

ET