There are a variety of ways to improve your credit. As long as you are careful to repay back in a timely manner, things like short term loans and credit cards can actually increase your overall credit score. For instance, say you take out a payday loan and repay it within the amount of time outlined in the contract. If reported, future lenders will see this exact short term cash loan on your credit report as an example of great debt management skills. The same thing goes for credit cards. Not only do they give you the option to “buy now, pay later” but if properly managed, they can be invaluable in building credit. As long as you are cautious to pick a card that works for you and pay your balance in a timely manner, a credit card can get you what you need now, and maybe even a high credit score later!
There are four types of credit cards that, if repaid properly, can be your stepping stone towards good credit: Secured credit cards, retail store cards, gas station cards and subprime credit cards. Secured credit cards require a deposit before credit is provided. This deposit is considered collateral in case you abuse the card and don’t pay it back properly. When choosing a secured card, be sure to find one that won’t charge any monthly or annual fee.
Your next option is a retail store card. Keep in mind that though retail cards offer perks such as a percentage off your purchases, they usually come with a high interest rate. If you’re looking to build credit, get a card with a store where you shop often and charge small amounts to it every now and then. At the end of the month, make sure to pay off the full balance. With no balance ever on the card, you won’t have to worry about the high interest rate.
A gas station card is another option that can be helpful in building your credit. Just make sure that you get a “revolving” credit card which means that you can defer payments on part of the balance. If you are required to pay the balance off each month, then it’s not the card you want, because the company will not report your credit history to the bureaus. So even though they have high interest rates and low credit limits, as long as you get a “revolving” credit card and pay it off correctly, it may help build your credit.
So whether you utilize payday loans or one of these types of credit cards, remember, the only way using them will build your credit is to use them wisely and pay them back in a timely manner.
