Today, companies use credit scores to make decisions on credit cards, auto loans, mortgages, insurance, and even employment. The higher your credit score, the more likely you are to get approved, pay less for your loan – or get hired. Credit scores range from 300-850.
Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the due date, collection actions, outstanding debt, and the age of your accounts, is used to develop your credit score. Your credit score does not include such factors as your gender, race, religion, age, education level or marital status.
If you do not have any credit or have bad credit, get a secured credit card like UNITY Visa®, to begin to build or rebuild your credit. A secured Visa credit card is like any other Visa credit card. There is no difference in how it is treated. It’s simply a credit card that requires a cash security deposit, which sets your credit limit. (Note: The annual fee will reduce your available credit when you initially receive your UNITY Visa card and whenever the annual fee is charged.) Unlike prepaid cards, it reports to the credit bureaus and therefore can help you rebuild credit. Check with your bank or credit union to see if they offer a secured credit card and they can show you how to rebuild credit.
Payment history is the #1 factor that influences your credit score. If you pay even one bill very late (60 days or more), your credit score can drop significantly. So to build credit, pay on time. Even if you only pay the minimum amount due.
The ratio of your balance to credit limit is an important factor that influences your credit score. So, don’t max out of your credit limit, even on your secured credit card. Keep your balance low or pay down your balance to rebuild credit. You can also increase your credit limit on your secured credit card (by contacting your bank or credit union and making an additional deposit) to increase your balance to credit limit ratio.
With some banks, your principal balance will not decrease if you only make the minimum payment. By making more than the minimum payment, you will improve the ratio of your balance to credit limit and rebuild credit.
A great way to improve your credit score is to pay down your current debt. Start by paying off low balance loans and then move to reduce the balances of larger loans. Do not over-extend yourself to pay down debt. Remember that making regular payments can improve your credit score…and making late payments can decrease your score. If you have additional funds after making your monthly payments, then pay down debt.
There are many online resources available to show you how to rebuild credit. Here are some suggestions:
Questionable negative items and inaccuracies on your credit report can and should be addressed. Be sure you work with a trusted professional that will work diligently and ethically to help you repair your credit reports, like Lexington Law®. Lexington Law is a consumer advocacy law firm with decades of experience helping hundreds of thousands of Americans work to improve their credit. Call 1-888-516-9077 or visit their site to learn how they may be able to help you repair your credit.
This summary is to get you started. Please check with a financial advisor, an attorney, family members, and/or friends.
OneUnited Bank is not a financial advisor and recommends you discuss with your family and a financial advisor. All services, including non-real estate secured business loans or equity capital, are not offered by OneUnited Bank. To learn more visit www.oneunited.com/loans.
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