Rebuild Slowly and Wisely

You've been working at cleaning up your credit file. You now have one or two secured credit cards and you're feeling better about yourself. But now that you have them, how do you use them? How do you ensure that you don't make the same mistakes you did to sink your credit in the first place? Well, in addition to applying a heaping helping of discipline which may have been lacking earlier, here are a few pointers on how you can slowly, methodically, and wisely keep your credit score on the rise.

First, use the credit that you have. Make a few small purchases each month with your credit cards, but no more than you can pay off fully when the bills arrive. You can keep track of your purchases in a checkbook register, or simply check your balances periodically at your card's website. Personal finance software is also readily available to assist you keep tabs on your accounts. If you don't think that you'll be able to control your spending if you carry the cards with you, then arrange to have some small monthly bill, such as your newspaper subscription or health club dues, charged to your cards each month. Then set up an automatic payment from your checking account to pay those bills. That way the credit lines are being used and the bills are being paid without your having to think about them.

Next, keep your balances low. It doesn't matter what your credit limits are. You don't want to use more than about thirty percent of the limits that you have, because one of criteria for determining your credit score is the percentage of credit that you actually use with regard to the total credit that you have available. Even if your credit limits are only a few hundred dollars, it doesn't matter; stay at thirty percent or lower. Keep in mind that these cards aren't for your convenience. And due to their high interest rates they certainly shouldn't be used to carry large quantities of debt. The cards that you have now are meant to help you rebuild your credit, period.

Don't get in a hurry; pace yourself. Never apply for several new credit accounts in a short period of time, especially when rebuilding your score. A good rule of thumb is to wait at least six months between applications for credit. Don't apply for cards or loans just to see if you can get them. Target your applications to lenders that are more likely to want your business. Applying for the American Express Silver-anodized Uranium Card while trying to improve a damaged credit file will do nothing more than add another potentially harmful inquiry to your report.

Finally, we come to perhaps the simplest and most useful advice that you could possible receive: pay your bills on time. Remember, the weightiest portion of your credit score is likely to be your payment history, and even one late payment can scuttle all of your hard-fought efforts. Make sure that all of your bills are paid on time, all of the time. It's the single best thing that you can do to enhance your credit profile.



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