Rebuild Your Credit Score Without Using Credit Cards
Rebuilding your credit score is important and if you ever plan on applying for a car loan or credit card, you’ll need to prove you are responsible when it comes to paying off your debt. That’s where your credit score comes in — the higher your credit score, the more opportunities you’ll have to get a loan at a low rate.
Whether you’re wondering how to establish credit or you’d like to improve your existing score, a credit builder loan will improve your credit score with on-time payments. Basically, the money you borrow is secured in your savings account for the term of the loan and dividends are paid on the money while you make payments and establish your credit. Once you have successfully paid the loan in full, the money becomes available in your account. Maintaining scheduled payments for a minimum of six months will allow the payment history to be reflected on your credit report and may help you improve your score.
Nearly 15 percent of the 7,400 credit unions in the United States offer a credit builder program. If you can’t find a credit union that you are eligible to join, you can always consider using a secured card, where you are required to put a certain amount of money into a bank account, say $250 or $500, which is then used as collateral. And the available amount of credit is often equivalent to the amount on deposit.
One of the differences between a credit builder loan and a secured card is that you immediately have access to money on the secured card, which isn’t necessarily true with a credit builder loan and the interest on the secured card is probably going to be much higher than the credit builder loan’s rates.
Having a “Good Mix of Credit” is basically ten percent of your FICO score — so what does that mean exactly? It means that you should have different types of credit lines open to improve your credit score which is why credit builder loans rebuild credit scores faster instead of getting another credit card.
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