Archive for Credit Tips

Building Credit without a Job

Since the Federal Credit Card Act of 2009, it has become ever moreSorting through your wallet difficult for those who do not have a job, such as stay-at-home parents, to get credit cards. This is because the law limits the access these people have to a credit line. In general, an independent income source is needed to get a credit card, which is important in building credit. Here are some smart ways to build a strong credit rating if you don’t have your own job.


Authorized Use

It is possible to become an authorized user on another credit card. If your spouse has a card, ask them to put you on the account as such an authorized user. When you are a user on another account, potential creditors can use those records to see if you have a strong payment history and if you have a low debt-to-credit ratio, which is one of the most important factors in building credit.


Branded Cards

Branded credit cards are great for building a strong credit rating. This means a card that is branded for a specific store: Torrid, Best Buy or Home Depot, for example. They have lower qualification terms in general and so tend to be easier to obtain. They also have lower limits, which means you will be less likely to get in over your head by overusing them, and will have an easier time paying them down. They are looked at in the same way as any other credit card when determining your credit rating, however, so they can be a great way to get your score up.


Secured Cards

Secured cards are sort of like prepaid cards. You put money into them — say, $1,000 — and you get a line of credit in that amount. This deposit is security against your failure to pay the card down. As you pay them down, you can sometimes raise the limit by increasing your deposit. They can be a great way to build your credit rating and then qualify for a normal credit card down the road.


Use and Pay

You need to use your card for it to build credit. A card that sits empty doesn’t help and can in some ways have a negative impact on your score. This means that to build your credit rating, you have to have activity on that card. Just as important, however, is paying down that balance regularly. Not only will this help to improve your credit score, fast payoff will ensure that you don’t build interest rates, which can be high on high-risk cards.


Buy Here Pay Here

Purchasing a vehicle with a buy here, pay here loan can also build your credit. This option allows you to finance directly through the dealer and pay at their site. The qualifications can be lower than for traditional car loans and can be a great way to build a strong credit rating.

If you think a buy here pay here car loan might be a good option for you, take a look at our resources and get in touch with us for more information today.

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Understanding Different Types of Credit

Understanding Different Types of Credit Master Lock on a Credit CardWhile credit at its most basic seems simple — borrow money from someone and make payments with interest until it’s paid back — there are different types of credit. Each kind of credit has different effects on your credit score and has its own benefits and pitfalls.


Installment Credit

Installment credit, or installment loans, are used to buy large ticket items — houses, cars and college tuition, among others. This kind of loan sees you receiving a fixed amount of money from a creditor which is usually a bank, credit union or financing company. You then have a set amount of time in which to pay back the loan. Car loans, for example, are usually for five or six years.

Installment loans can have either fixed or variable interest rates. A variable rate can rise and fall based on current federal interest rates, while a fixed rate stays the same for the life of the loan regardless of economic conditions. The two types of installment loans can be either secured, which uses collateral to insure the loan, or unsecured, which usually carries a higher interest rate and a higher risk of credit rating damage.


Installment Benefits

There are several benefits to this type of loan. First, if you can get a fixed rate, you will have an easy time budgeting payments as they will remain the same every month for the life of the loan. Installment loans also usually carry lower interest rates than other types of credits. Your balance is guaranteed to decrease over time so you will see your debt diminish. Finally, you only pay interest on the original cash borrowed.


Revolving Credit

Credit cards, lines of credit and the like are called revolving credit. This open-ended borrowing gives you a limit and you can use the credit as needed, paying it back over time. There is generally no collateral involved in revolving credit, and after you get the card or line of credit you don’t have to apply to use it every time. However, this type of credit carries higher interest rates and is almost entirely based upon your credit score.

The big risk with this kind of credit is that your interest rate alone can outstrip your minimum payment, meaning you are struggling to keep your debt even and may have difficulty reducing your debt. In addition, late payments can have a severe effect on your credit score.


Revolving Credit Benefits

When you receive a credit card or line of credit, you can use it as you like, whenever you need. There are no additional applications required. This makes it a supremely flexible means of covering emergency expenses. In addition, if you can afford to do so, you can alter your monthly payments to pay down the debt faster.

The different types of credit each have their own benefits and drawbacks. Understanding these will help you make the right choice when you need to make a purchase. If you need credit to buy a new car, we can help. Read about our buy here pay here financing and contact us today to get started!

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