My OperaImproving Your Credit Score
Wednesday, September 8, 2010 6:12:34 AM
Most people are aware that a higher credit score will result in a greater number of opportunities for them. Some of these include being eligible for lower interest rates on all kinds of loans, being able to get that mortage for your home and lower insurance premiums to pay. These same people also understand that there are three compnaies that are responsible for the compilation of credit rating reports. Is it possible to improve your credit score without any contact with these three credit bureaus? Most definitely, as this article will explain.
Your credit rating can be improved simply by lowering your credit to debt ratio and increasing your credit limit. Each time an account is opened with a lender or credit card company a credit limit is set. If your credit score is low, your chances of obtaining an unsecured or standard credit card are minimal. We will look at three options that are available for people in this situation.
1. Sub-prime Credit Cards. This credit card will only offer a small line of credit, sometimes as little as $300 and they often charge extremely high fees. Added to this, you may have to pay an application fee, an account set up fee, a "participation" fee which is charged monthly and finally an annual fee. After all this fee paying, you won't have much credit to spend. It is a wise move to avoid this type of card as in addition to the exhorbitant fees, they can actually cause damage to your credit rating.
2. Secured Credit Cards. Sometimes, families with low credit scores are able to get this form of card. Generally a cash deposit has to be paid. It works this way: You place $500 into the secured account and then use this credit charging up goods and services to the value of $500. Some people may well ask, why not just spend the cash? The reason behind using this card in this way is that it will help in increasing your credit limit. It is a good idea, though, to check before you obtain one - some of these cards have higher fees than others.
3. Sub-prime Merchandise Cards. The better way of increasing your line of credit without risking financial disaster is to obtain a sub-prime merchandise card. This type of card allows you to make purchases from a particular store, which is generally owned by the company from whom you obtained the card and sometimes an online retailer. For whatever you purchase, you must put down a deposit with the balance being financed by the card. This has the advantage that your new credit line is reported to the major credit bureaus. Let's look at an example. You obtain a $5,000 card and use it to finance a $500 purchase. The credit bureaus recognize an increase in your credit limit of $5,000 and the outstanding balance, being small, assists in reducing your debt ratio to credit ratio.
The sub-prime merchandise card has its limitations in that is not like a VISA or MasterCard. It won't be accepted everywhere you go, for example the food store or gas station. You should also make sure that before you choose a card, the provider does report its use to the credit bureaus in order for it to work for you.
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