Which Credit Cards to Use when you have bad credit
When you have bad credit, a secured credit card is the only option you have. That’s what we got for Brian, and by maintaining a good payment history on his secured credit card, he raised his credit rating by nearly 50 points in less than a year. Here’s a list of the best secured credit cards to apply for, including the Open Sky Secured Visa and Discover It Secured.
Also, keep a credit card issuer’s customer service track record. J.D. Power releases a study every year on credit card customer satisfaction. According to J.D Power, the top three card issuers are American Express, Discover, and Capital One. These are the companies most likely to resolve your issues on the first call. As for banks, Capital One, BB&T, and Chase take the top marks.
Now we get to the fun part, where I’ll teach you the magic number credit agencies really want you to carry in debt and why.
Your FICO credit score is calculated using the following formula:
35 percent payment history
30 percent amount owed
15 percent length of history
10 percent new credit
10 percent types of credit
This means the bulk of your credit score is made up of on-time payments and how much available credit you have. Obviously paying your bills on time will improve your credit history over time, so we’ll focus on the debt to credit ratio.
Maintaining low balances on Credit cards can raise your score by up to 100 points
Many experts will tell you to stick to 30 percent of your available credit. This means if you have $1000 of credit, you should only have balances totaling $300.The truth is the more available credit you have, the better your score will be. Maintaining low balances on credit cards can raise your score by up to 100 points.
I recommend keeping your available credit at 94 percent. So does Experian. I checked my own credit report one day and that’s the advice they gave me to raise my own credit score. You should only be spending $6 for every $100 of available credit you have to successfully raise your credit to the best possible score.
What this shows creditors is that if something bad happens in your life (medical emergency, job loss, etc.), you still have access to funds to pay your bills for the next six months. This lowers your credit risk and makes you someone lenders love to work with.
I have another game-changing trick up my sleeves to boost your credit score.
Credit Card you should Avoid
Our customer Brian couldn’t understand why his credit was so bad. He seemed to be doing everything right – he paid off all his old debts and avoided credit cards. Credit cards are necessary to maintain a healthy credit score though.
But all the credit cards created are not equal, and they can affect your credit score in different ways. Before applying for credit cards to raise your credit score, it’s important to understand how they truly impact your FICO rating.
When discussing credit limits, we’re only talking about normal credit cards, which are called revolving lines of credit. This means if you have a $1000 limit and a $600 balance, you can still spend $400.
Secured credit cards act more like installment loans on your credit report
Secured credit cards (which are prepaid) and store credit cards act more like installment loans on your credit report. This means if you have a $1000 limit and a $600 balance, it still shows on your credit report as a $1000 loan with no available credit.
Avoid cards with high fees and bad customer service. In 2018, the worst credit cards include First PREMIER Bank Gold Credit Card, Bancorp South Gold Mastercard, and Arvest Bank Visa Classic Card. These cards may hurt your credit rating more than they help.
How you manage and use your credit responsibly – Just Follow These Simple Steps
Having that said, the most important is how you manage and use your credit responsibly. You should never be late to pay your credit card bill. Use the online payment option to manage and set your bill payment automatically. Always spend less than you earn. For this, you need a budget that you should follow strictly.
How to maintain a high balance on each card and increase credit limit – Powerful Lifehack
Only spending six percent of your available credit makes it difficult to gain credit increases from your credit card companies. They’re not going to raise your limits on a card you never use.
So, I use this powerful lifehack to boost my credit score into the stratosphere, and you can have massive success with it too!
What I do is charge and maintain a high balance on each card for two months. In the third month, I pay it all off and let it sit for two months. This way, I’m using my credit card enough for the bank to continue raising my limit (thus raising my available credit) while maintaining enough available credit to keep the credit agencies happy.
Master this method, and you’ll notice your score go within months. And there are a few more insider loopholes to instantly transform your life. All these tricks have the tremendous potential to increase your credit score that is already been proven.
Pre-Due Date Payments
One trick to boost the credit utilization piece of your score without really having to change your spending behavior is to pay your bill approximately 10 days before your due date.
Monthly Spend: $500
Credit Limit: $1065
Due: 25th of each month
Monthly Spend Paid On Due Date (25th of the month): 53% Utilization
Monthly Spend Paid 10 Days Pre-Due Date (15th of the month): 6% Utilization
Credit Utilization Formula: Credit Used / Total Credit
Credit Bumpers to Protect History – Cushion the Blow
Just one late payment that happened years ago, maybe when you were back in college, could significantly impact your score today. One trick to absorb some of the impacts of a negative on your Credit History is to use Credit Bumpers by adding more Accounts to your total number of Open Accounts. This example shows how much faster you recover from one late payment when you have 5 open accounts instead of just one.
1 Account with 1 Missed Payment:
Year 1: 11 On-Time / 12 Total = 91.67% Very Poor
Year 2: 23 On-Time / 24 Total = 95.83% Very Poor
Year 3: 35 On-Time / 36 Total = 97.22% Poor
Year 4: 47 On-Time / 48 Total = 97.92% Poor
Year 5: 59 On-Time / 60 Total = 98.33% Fair
5 Account with 1 Missed Payment:
Year 1: 59 On-Time / 60 Total = 98.33% Fair
Year 2: 119 On-Time / 120 Total = 99.17% Good
Year 3: 179 On-Time / 180 Total = 99.44% Good
Year 4: 239 On-Time / 240 Total = 99.58% Excellent
Year 5: 299 On-Time / 300 Total = 99.67% Excellent
Credit History Formula: On-Time Payments / Total Number of Payments
There’s one final tip (Search Court Records for Judgements) to get your credit score out of the gutter and make your life easier.