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Use it to Build it!

November 22, 2021

Want to rebuild your credit rating?  Then you will have to use credit to do that.  If you don’t already have some form of credit available, you will have to get some.  Pay day loans are certainly not the kind of credit (debt) anyone should want and probably don’t help a lot with your credit score, especially if they are small loans – they may go unreported to the Credit Bureaus.

While this is not an endorsement of the company, Capital One stands out as being very active in the higher risk credit card market space.  Unlike most other issuers they have been known to make credit cards available for people who under bankruptcy or a proposal.

The Capital One starter programme appears to involve the issuance of card with a three hundred dollar limit, in exchange for a retainer of three hundred dollars.  It seems that customers are quickly transitioned to higher credit limits with a refund of the retainer after a trial period of active and appropriate use.

People who have credit cards (the most commonly used form of credit) but never, or rarely, use them are unlikely to see improvements in their credit scores.  Credit scores are based on credit activity, building a history of appropriate use.  To avoid the risks associated with credit cards avoid carry balances from one month to another – unless you used your credit card for an emergency car repair or something of that nature.

Make frequent smaller purchases, groceries, gasoline, etc., then quickly pay the purchase off with a funds transfer from your bank account.  That way you will be recording both the usage of the card and a positive payment history.  Mortgage brokers have told us that lenders like to see bankrupts having two bank issued credit products on their credit reports, being two years away from discharge and having at least two years of stable employment.

It seems if you used a non-bank credit product to get started you should still target getting back into bank borrowing to improve your status.  Since we would not recommend having more than two credit cards at any one time, once you get a bank issued credit card, we suggest you close the non-bank account.

For more tips follow our blog or give us a call for a free handout – 519-646-2222