If you love to shop, you can use yourÂ fashion sense toÂ build or even rebuild your credit.
Store-branded credit cardsÂ are some of theÂ easiest cardsÂ to qualify for and are often extended to those who haveÂ bad credit because they have lower criteria than traditional credit cards. Using them, especially if you’re loyal to a particular store, can bring card rewards, discounts and, if you pay your balanceÂ off every month, better credit.
In most cases, when you apply for a card, the retailer will offer a discount on that dayâs purchase.Â Sometimes the discount will be extended toÂ purchases made within a short time frameÂ (24 hours, for example), as an incentive to spend more. The risk is that instead of saving money, you end up spending more than planned, so it’s wiseÂ to be wary.
Watch Your Credit Scores
When you open your new credit card, you may see a dip in your credit scores for two reasons: one, the inquiry created when the issuer checks your credit score, which may cause your scores to drop, though usually not more than a few points. Second, a new account with a balance is often seen as a risk factor. As long as you pay on time and keep your balances below 30% of your credit line, or ideally 10%, you could eventually see a slight riseÂ becauseÂ you’ll have a positive new credit reference, which isÂ beneficial if you are trying to build or rebuild credit.
As you use your new card, you can track how your usage and payments are affecting your credit by signing up for Credit.com’s free credit report summary. In addition to getting two free credit scores, youâll get your own credit report card that showsÂ how youâre doing in five key areas on your credit report that alsoÂ determine your credit score â payment history, debt usage, credit age, account mix and inquiries.
Know the APR
Interest rates for department store credit cards are almost always high, often betweenÂ 19% and 22%, or more. If you carry a balance, the interest you pay will likely exceed the amount you saved with the discount. ThisÂ means carrying a balanceÂ could hamper your goals, especiallyÂ if you fail toÂ make on-time payments.
Given store credit cards’ high APRs, you won’t want to go on a shopping spree with them, nor will you want to put more purchases on the card than your budget can handle. (For tips on cutting back without feeling deprived, you can go here.)Â That said, making a couple of small purchases a month, say, on home essentials or groceries, and paying them off quickly (and on time) will likely beef up your credit.
Before You ApplyÂ
Before you fill out anÂ application, you’ll want toÂ know where your credit stands so you have a good sense of what type of cardÂ you might qualify for. KnowingÂ your score willÂ also inform your decision to apply forÂ a card in general, asÂ inquiries on your credit report can cause your score to take an unnecessary hit.
More on Credit Reports & Credit Scores:
The Credit.com Credit Reports Learning Center
Whatâs a Good Credit Score?
How to Get Your Free Annual Credit Report
The post How to Use Your Shopping Addiction to Build Credit appeared first on Credit.com.
Have you ever wondered, "How many credit cards should I have? Is it wise to have a wallet full of them? Does having multiple credit cards hurt my credit score?"
If you’ve been following this blog or the Money Girl podcast, you know the fantastic benefits of having excellent credit. The higher your credit scores, the more money you save on various products and services such as credit cards, lines of credit, car loans, mortgages, and insurance (in most states).
Even if you never borrow money, your credit affects other areas of your financial life.
But even if you never borrow money, your credit affects other areas of your financial life. For instance, having poor credit may cause you to get turned down by a prospective employer or a landlord. It could also increase the security deposits you must pay on utilities such as power, cable, and mobile plans.
Credit cards are one of the best financial tools available to build or maintain excellent credit scores. Today, I'll help you understand how cards boost your credit and the how many credit cards you should have to improve your finances.
Before we answer the question of how many credit cards you should have in your wallet, it's important to talk about using them responsibly so you're increasing instead of tanking your credit score.
5 tips for using credit cards to build credit
Make payments on time (even just the minimum)
Don’t rely on being an authorized user
Never max out cards
Use multiple cards
Keep credit cards active
A common misconception about credit is that if you have no debt you must have good credit. That’s utterly false because having no credit is the same as having bad credit. To have good credit, you must have credit accounts and use them responsibly.
Having no credit is the same as having bad credit.
Here are five tips for using credit cards to build and maintain excellent credit scores.
1. Make payments on time (even just the minimum)
Making timely payments on credit accounts is the most critical factor for your credit scores. Your payment history carries the most weight because it’s an excellent indicator of your financial responsibility and ability to pay what you owe.
Having a credit card allows you to demonstrate your creditworthiness by merely making payments on time, even if you can only pay the minimum. If the card company receives your payment by the statement due date, that builds a history of positive data on your credit reports.
I recommend paying more than your card’s minimum. Ideally, you should pay off your entire balance every month so you don’t accrue interest charges. If you tend to carry a balance from month-to-month, it’s wise to use a low-interest credit card to reduce the financing charge.
2. Don’t rely on being an authorized user
Many people start using a credit card by becoming an authorized user on someone else’s account, such as a parent’s card. That allows you to use a card without being legally responsible for the debt.
Some credit scoring models ignore data that doesn’t belong to a primary card owner.
Some card companies report a card owner’s transactions to an authorized user’s credit report. That could be an excellent first step for establishing credit … if the card owner makes payments on time. Even so, some credit scoring models ignore data that doesn’t belong to a primary card owner.
Therefore, don’t assume that being an authorized user is a rock-solid approach to building credit. I recommend that you get your own credit cards as soon as you earn income and get approved.
3. Never max out cards
A critical factor that affects your credit scores is how much debt you owe on revolving accounts (such as credit cards and lines of credit) compared to your total available credit limits. It's known as your credit utilization ratio, which gets calculated per account and on your accounts' aggregate total.
A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.
Having a low utilization ratio shows that you use credit responsibly by not maxing out your account. A high ratio indicates that you use a lot of credit and could even be in danger of missing a payment soon. A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.
For example, if you have a $1,000 card balance and a $5,000 credit limit, you have a 20% credit utilization ratio. The formula is $1,000 balance / $5,000 credit limit = 0.2 = 20%.
There's a common misconception that it's okay to max out a credit card if you pay it off each month. While paying off your card in full is smart to avoid interest charges, it doesn't guarantee a low utilization ratio. The date your credit card account balance is reported to the nationwide credit agencies typically isn't the same as your statement due date. If your outstanding balance happens to be high on the date it's reported, you'll have a high utilization ratio that will drag down your credit scores.
4. Use multiple cards
If you need more available credit to cut your utilization ratio, there are some easy solutions. One is to apply for an additional credit card, so you spread out charges on multiple cards instead of consistently maxing out one card. That reduces your credit utilization and boosts your credit.
Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.
For example, if you have two credit cards with $500 balances and $5,000 credit limits, you have a 10% credit utilization ratio. The formula is $1,000 balance / $10,000 credit limit = 0.1 = 10%. That’s half the ratio of my previous example for one card.
Another strategy to cut your utilization ratio is to request credit limit increases on one or more of your cards. Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.
5. Keep credit cards active
Credit card companies are in business to make a profit. If you don't use a card for an extended period, they can close your account or cut your credit limit. You may not mind having a card canceled if you haven't been using it, but as I mentioned, a reduction in your credit limit means danger for your credit scores.
A reduction in your credit limit means danger for your credit scores.
No matter if you or a card company cancels one of your revolving credit accounts, it causes your total amount of available credit to shrink, which spikes your utilization ratio. When your utilization goes up, your credit scores can plummet.
Anytime your credit card balances become a higher percentage of your total credit limits, you appear riskier to creditors, even if you aren't. So, keep your cards open and active, especially if you're considering a big purchase, such as a home or car, in the next six months.
In general, I recommend that you charge something small and pay it off in full several times a year, such as once a quarter, to stay active and keep your available credit limit in place.
If you have a card that you don't like because it charges an annual fee or a high APR, don't be afraid to cancel it. Just replace it with another card, ideally before you cancel the first one. That allows you to swap out one credit limit for another and avoid a significant increase in your credit utilization ratio.
If you're determined to have fewer cards, space out your cancellations over time, such as six months or more.
How many credit cards should you have to build good credit?
Now that you understand how credit cards help you build credit, let's consider how many you need. The optimal number for you depends on various factions, such as how much you charge each month, whether you use rewards, and how responsible you are with credit.
There's no limit to the number of cards you can or should have if you manage all of them responsibly.
According to Experian, 61% of Americans have at least one credit card, and the average person owns four. Having more open revolving credit accounts makes you more likely to have higher credit scores, but only when you manage them responsibly.
As I mentioned, having more available credit compared to your balances on revolving accounts is a crucial factor in your credit scores. If you continually bump up against a 20% utilization ratio, you likely need an additional card.
You can keep an eye on your credit utilization and other important credit factors with free credit reporting tools such as Credit Karma or Experian.
Also, consider how different credit cards can help you achieve financial goals, such as saving money on everyday purchases you're already making. Many retailers, big box stores, and brands have cards that reward your loyalty with discounts, promotions, and additional services.
If you continually bump up against a 20% utilization ratio, you likely need an additional card.
I use multiple cards based on their benefits and rewards. For instance, I only use my Amazon card to get 5% cashback on Amazon purchases. I have a card with no foreign transaction fees that I use when traveling overseas. And I have a low-interest card that I only use if I plan to carry a balance on a large purchase for a short period.
There's no limit to the number of cards you can or should have. Theoretically, you could have 50 credit cards and still have excellent credit if you manage all of them responsibly.
My recommendation is to have a minimum of two cards so you have a backup if something goes wrong with one of them. Beyond that, have as many as you're comfortable managing and that you believe will benefit your financial life.
If you have bad credit and need a car loan, there are some challenges when compared to obtaining a standard car loan. However, pick your head up because there are a handful of great lenders that specifically tailor their programs to people with bad credit. We researched the landscape of lenders that can help you get a car loan even if you have a below-average credit score.
Based on our study, OneMain Financial and LightStream are two of the top lenders offering bad credit card loans. This is due to factors including loan options, requirements to qualify, and interest rates offered. Of course, we offer in-depth reviews of all the top lenders who offer bad credit car loans further down in this piece.
Apply now with our top pick: OneMain Financial
In this guide we also help you understand the factors that go into selecting the right auto lender, and how to get the best rate you can.
Most Important Factors for Bad Credit Car Loans
If youâre in the market for a bad credit car loan, there are a plethora of factors to consider and compare. Here are the main loan details we looked at in our study, and the ones you should prioritize as you select the best car loan for your needs.
Check your credit score. And understand what is in your credit report.
FICO scores under 579 is considered ‘poor’. But you may need a bad credit loan with a score as high as 669.
Interest rates and fees matter. These can make a huge difference in how much you pay for an auto loan each month.
Compare loan terms. Consider your repayment timeline and compare lenders with this in mind.
Getting prequalified online can help. Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report.
Watch out for loan restrictions. Some lenders impose restrictions on what car you can purchase. Keep this in mind to avoid unpleasant surprises later.
The Best Bad Credit Car Loans of 2021
The best bad credit car loans make it easy for consumers to qualify for the financing they need. The following lenders made our list due to their superior loan offerings, excellent customer service, and reputation in this industry.
Car Loan Company
Best for Flexibility
Best Personal Loan Option
Best Loan for Bad Credit and No Credit
Best Loan Comparison Site
Best Big Bank Loan for Bad Credit
Best for Fast Funding
Why Some Lenders Didn’t Make the Cut
While the lenders we are profiling are the best of the best, there are plenty of bad credit car loans that didnât quite make the cut. We didnât include any lenders that only offer auto loan refinancing, for example, since we know many people need a car loan in order to purchase a new or used car or truck. We also stayed away from bad credit car loans that charge outrageous fees for consumers with the lowest credit scores.
Bad Credit Auto Loan Reviews
We listed the top companies we selected in our study above, but we also aim to provide readers with more insights and details on each. The reviews below highlight the highlights of each lender that made our list, plus our take on who they might be best for.
OneMain Financial: Best for Flexibility
OneMain Financial offers personal loans and auto loans with interest rates that range from 18.00% to 35.99%. You can repay your auto loan in 24, 36, 48, or 60 months, and you can use this lender to borrow up to $20,000 for a new or used car. You can apply for your auto loan online and from the comfort of your own home, and itâs possible to get approved within a matter of minutes.
While OneMain Financial doesnât list a minimum credit score requirement, itâs believed they will approve consumers with scores as low as 600. You should also note that auto loans from OneMain Financial come with an origination fee of up to 5% of your loan amount.
Sign Up With OneMain Financial Today
Why This Lender Made Our List: OneMain Financial offers a lot of flexibility in terms of your loan terms, including the option to repay your auto loan over five years. OneMain Financial also has pretty decent reviews from users for a bad credit lender, and they have an A+ rating with the Better Business Bureau.
Potential Downsides to Be Aware Of: OneMain Financial charges some pretty high rates for its bad credit loans, and donât forget that you may need to pay an origination fee that is up to 5% of your loan amount. Their loans are also capped at $20,000, which means this lender wonât work for everyone.
Who Itâs Best For: This lender is best for consumers with really poor credit who need auto financing but canât get approved for a better loan.
Upgrade: Best Personal Loan Option
Upgrade is an online lender that offers personal loans with fixed interest rates, fixed monthly payments, and a fixed repayment timeline. You can borrow up to $50,000 in an unsecured loan, which means you wonât actually use the car you purchase as collateral for the loan.
You can repay the money you borrow over 36 to 60 months, which makes it possible for you to tweak your loan offer to secure a monthly payment you can afford. Upgrade has a minimum credit score requirement of 620 to qualify, although theyâll consider additional factors such as your income and employment history.
Sign Up With Upgrade Today
Why This Lender Made Our List: Upgrade lets you âcheck your rateâ online without a hard inquiry on your credit report. This makes it easy to shop around and compare this loan offer to others without having to fill out a full loan application. Also note that Upgrade has an A+ rating with the BBB.
Potential Downsides to Be Aware Of: Upgrade charges APRs as high as 35.89% for consumers with the worst credit, and an origination fee of up to 6% of your loan amount might also apply.
Who Itâs Best For: Upgrade is best for consumers with decent credit who need to borrow a larger loan amount. This loan is also best for anyone who wants an auto loan that isnât secured by their vehicle.
AutoCreditExpress.com: Best Loan for Bad Credit and No Credit
AutoCreditExpress.com is an online platform that lets consumers with bad credit and even no credit get the financing they need. Once you fill out some basic loan information, youâll be connected with a lender who can offer you financing as well as a dealership in your area. From there, youâll head to the local dealership and pull the pieces of your auto loan together, including the purchase price of the car you want.
Sign Up With Autocreditexpress.com Today
Why This Lender Made Our List: AutoCreditExpress.com has an A+ rating with the Better Business Bureau. This platform also makes it possible for consumers with no credit at all to finance a car, which is a welcome relief for people who are building credit for the first time.
Potential Downsides to Be Aware Of: This website is a loan platform but they donât offer loans directly to consumers. This means you wonât have any idea on rates and terms until you fill out an application and get connected with a lender.
Who Itâs Best For: This loan is best for consumers with no credit or minimal credit history who cannot get approved for a loan elsewhere.
MyAutoLoan.com: Best Loan Comparison Site
MyAutoLoan.com is a loan comparison site that makes it easy to compare up to four auto loan offers in a matter of minutes. You can use this website to apply for a new auto loan, but you can also utilize it to consider refinancing offers for an auto loan you already have. You can also use funds from this platform to purchase a car from a dealer or from a private seller.
Sign Up With MyAutoLoan.com Today
Why This Lender Made Our List: Comparing auto loans in terms of their terms, rates, and fees is the best way to save money and wind up with the best deal. Since MyAutoLoan.com is a loan comparison site, they make it easy to shop around and compare competing offers.
Potential Downsides to Be Aware Of: Loan comparison sites connect you with other lenders who have their own loan terms and minimum requirements for approval. Make sure you know and understand all the details of loans youâre considering before you sign on the dotted line.
Who Itâs Best For: MyAutoLoan.com is best for consumers who want to do all their auto loan shopping with a single website.
Capital One: Best Big Bank Loan for Bad Credit
Capital One offers online auto loan financing in conjunction with a program called Auto NavigatorÂ®. This program lets you get prequalified for an auto loan online, then work with a participating dealer to coordinate a loan for the car you want. Capital One also lets you search available vehicles at participating dealerships before you apply for financing, making it easy to figure out how much you might need to borrow ahead of time.
Sign Up With Capital One Today
Why This Lender Made Our List: Capital One offers the huge benefit of letting you get prequalified online without a hard inquiry to your credit report. Capital One is also a reputable bank with a long history, which should give borrowers some comfort. They have an A+ rating with the BBB and plenty of decent reviews from consumers.
Potential Downsides to Be Aware Of: You should be aware that Capital One auto loans only work at participating dealers, so you may be limited in terms of available cars to choose from.
Who Itâs Best For: Capital One auto loans are best for consumers who find a car they want to buy at one of the participating lenders that works with this program.
LightStream: Best for Fast Funding
LightStream offers online loans for a variety of purposes, including auto financing. Their auto loans for consumers with excellent credit start at just 3.99% with autopay, and even their loans for consumers with lower credit scores only run as high as 16.79% with autopay.
You can apply for your LightStream loan online and get approved in a matter of minutes. This lender can also send your funds as soon as the same business day you apply.
A minimum credit score of 660 is required for loan approval, although other factors like your work history and income are considered.
Sign Up With LightStream Today
Why This Lender Made Our List: LightStream offers auto loans with exceptional terms, and thatâs even true for consumers with less than perfect credit. You can also get your loan funded as soon as the same business day you apply, which is crucial if you need auto financing so you can get back on the road.
Potential Downsides to Be Aware Of: With a minimum credit score requirement of 660, these loans wonât work for consumers with the lowest credit scores.
Who Itâs Best For: LightStream is best for people with decent credit who need to get auto loan financing as quickly as possible.
What You Need To Know When Applying For A Car Loan With Bad Credit
Interest rates and fees matter.
If you think your interest rate and loan fees wonât make a big difference in your monthly payment, think again. The reality is that rates and fees can make a huge difference in how much you pay for an auto loan each month. Consider this: A $10,000 loan with an APR of 35.89% will require you to pay $361 per month for five years. The same loan amount at 21.99% APR will only set you back $276 per month. At 9.99%, you would pay only $212 per month for five years. The bottom line: Make sure to compare auto loans for bad credit so you wind up with the lowest possible APR you can qualify for.
Take steps to improve your credit score before you apply.
Itâs not always possible to wait to apply for a car loan, but you may be able to secure a lower interest rate and better loan terms if you can improve your credit score before you borrow money. The most important steps you can take to improve your score include paying all your bills early or on time, as well as paying down debt in order to decrease your credit utilization. You should also refrain from opening or closing too many credit card accounts in order to avoid new inquiries on your credit report and maintain the longest average length of your credit history possible.
Compare loan terms.
Some lenders let you borrow money for up to 84 months, while others let you repay your loan over 36 or 60 months at most. If you need to repay your loan over a longer timeline in order to secure an affordable monthly payment, make sure to compare lenders based on this factor. If youâre having trouble figuring out how much can you can afford, gauging affordability based on the monthly payments you can handle can also help in that effort.
Getting prequalified online can help.
Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report. This makes it considerably easier to compare rates and shop around without formally applying for an auto loan. Getting prequalified with more than one lender can also help you determine which one might offer the lowest rate without having to fill out a full loan application.
Watch out for loan restrictions.
As you compare the lenders on this list, keep in mind that not all lenders extend loans for any car you want. Some only let you finance cars with participating lenders in their network, which can drastically limit your options and make it impossible to purchase a car from a private seller. If you hope to purchase a car from someone you know or a website like craigslist.org, you may want to consider reaching out to your personal bank or a credit union you have a relationship with.
Bad credit car loans donât have to be forever.
Finally, you should know that a car loan for bad credit doesnât have to last forever. You may need to borrow money for a car right now regardless of the interest rate and terms you can qualify for, but it may be possible to refinance your loan into a better loan product later on. This is especially true if you focus on improving your credit score right away, and if you use your auto loan as an opportunity to prove your creditworthiness.
How to Get the Best Rate
1. Check your credit score.
Your credit score is one of the most important defining factors that dictate loan costs. Before you apply for an auto loan, it can help you check your credit score to see where you stand. Your score may not be as bad as you realize, but it could also be worse than you ever imagined. Either way, it helps to know this important information before you start shopping for an auto loan.
2. Improve your credit over time.
If your credit score needs work, youâll want to take steps to start improving it right away. The most important steps you can take to boost your credit score include paying all your bills early or on time and paying down debt to decrease your credit utilization. Also, make sure youâre not opening or closing too many credit accounts within a short amount of time.
3. Check your credit reports.
Use the website AnnualCreditReport.com to get a free copy of your credit reports from all three credit bureaus. Once you have this information, check over your credit reports for errors. If you find false information that might be hurting your score, take the steps to have the incorrect information removed.
4. Compare loan offers from at least three lenders.
A crucial step to get the best rate involves shopping around and comparing loan offers from at least three different lenders. This is important since lenders with different criteria might offer a lower APR or better terms than others.
5. Be flexible with repayment terms.
Also consider a few different loan terms provided you can afford the monthly payment with each. Some auto lenders offer better rates for shorter terms, which can help you save money if you can afford to repay your loan over 24 or 36 months instead of 60+.
How We Chose the Best Auto Loans
The lenders on our list werenât plucked out of thin air. In fact, the team behind this guide spent hours comparing auto lenders based on a wide range of criteria. Hereâs everything we considered when comparing the best bad credit car loans of 2021:
Interest Rates and Loan Terms: Our team looked for loans that offer reasonable rates and terms for consumers with poor credit. While higher APRs are typically charged to consumers with a low credit score, we only considered lenders that offer sensible rates that donât seem out of line for the auto loan market.
Ratings and Reviews: We gave preference to lenders who have decent reviews online, either through Consumer Affairs, Trustpilot, or another third party website. We also gave higher marks to lenders who have a positive rating with the Better Business Bureau (BBB).
Online Availability: Lenders who offer full loan details online were definitely given top priority in our ranking, and lenders who let you get prequalified online without a hard inquiry on your credit report were given the most points in this category. But since not everyone wants to apply for a loan online, we also included some lenders that let you apply over the phone.
Approval Requirements: Finally, we looked for lenders that extend credit to consumers with low credit scores in the first place. Not all lenders offer specific information on approval requirements, but we did our best to sort out lenders that only accept borrowers with good or excellent credit.
Summary: Best Bad Credit Card Loans of 2021
Best for Flexibility: OneMain Financial
Best Personal Loan Option: Upgrade
Best Loan for Bad Credit and No credit: AutoCreditExpress.com
Best Loan Comparison Site: MyAutoLoan.com
Best Big Bank Loan for Bad Credit: CapitalOne
Best for Fast Funding: LightStream
The post What Are the Best Car Loans When You Have Bad Credit? appeared first on Good Financial CentsÂ®.
Credit cards play a significant role in your financial lifeâfrom establishing credit and determining your buying power to potentially being a financial lifeline during times of crisis.
Before you add another credit card to your wallet, you should consider your buying habits and financial strategies. The answers to the following five questions may help you decide if another credit card is right for you.
New Cardholder? Wait a Year
If you’re a new cardholder, try holding off for one year before applying for another credit card. It can take six months to a year for your card usage to affect your credit score.
Without an established credit history, it may be difficult to get lenders to extend you credit. A short credit history can also impact your interest rates, keeping them higher than desirable. If you’ve had your credit card for less than a year, getting a new one may not be the best choice right now.
What to Do
Be patient. Use your current credit card on a regular basis and pay on time and in full each month. Your payment history is the largest factor that determines your credit score. When you do apply for a second credit card, the lending company will see how responsible you’ve been. They will then be more likely to extend you credit with a lower interest rate.
Trying to Build Credit? One Card May Be Enough
If you want another card because youâre trying to build your credit, one card may be enough. The most important part of building credit is using your existing accounts wiselyânot adding more. Two cards could improve your credit utilization ratio, as long as you donât rack up debt on either card. And if you donât plan on actually using your second card, keep in mind that some credit card companies have a policy of canceling credit cards due to inactivityâand a canceled credit card can cause your credit score to take a dip.
What to Do
Instead of getting a second card, focus on using your current cards more effectively. Pay your balances on time and in full to help improve your credit score. If youâre ready to open a new type of account to increase your account mix, consider a small personal loan.
Already Have Multiple Cards? Review Your Payments
It may be tempting to have more spending power at your disposal, but before you apply for another credit card, make sure you can financially handle it. Examine how you’re currently managing your credit cards.
Are you struggling to pay the minimum each month? Are you unable to make payments on time? If you answer “yes” to either of these questions, it’s probably not a good idea to apply for another card right now.
What to Do
If you’re already having a hard time paying your credit card bills, ask yourself why you think you should get another credit card. Is it because you’ve already maxed out the cards you have in use? Don’t open yourself up to more debt by opening another line of credit.
Instead, develop a plan to lower your current credit card balances and create a budget to help organize and control your spending. A balance transfer credit card may be a solution if you’re looking to consolidate your debt into one, easy-to-track payment plan.
TD Cash Credit Card
on TD Bank’s secure website
0% Introductory APR for 6 months on purchases
12.99%, 17.99% or 22.99% (Variable)
0% Introductory APR for 15 months on balance transfers
Snapshot of Card Features
Earn $150 Cash Back when you spend $500 within 90 days after account opening
Earn 3% Cash Back on dining
Earn 2% Cash Back at grocery stores
Earn 1% Cash Back on all other eligible purchases
$0 Annual Fee
Visa Zero Liability
Instant credit card replacement
Card Details +
Running a Balance? Check the Interest Rates
Carrying a balance from month to month can affect your credit score by increasing your utilization rate. It can also put a big dent in your wallet depending on your interest rates. If you regularly make your monthly minimum payments but keep a balance, it could be beneficial to get a new card with lower ratesâas long as you can use it responsibly. If you want to keep your old card active, split the same amount of spending between the two cards, rather than doubling your spending, and your utilization rates and fees could go down.
What to Do
Check the interest rates on your current card. If youâve been keeping up with your payments and your overall credit score is good, you could qualify for a better interest rate to replace this one with. While some credit cards may hit everything on your perk and benefit checklist, if the interest rate is too high, skip it. Look for credit cards with low interest rates that will be sustainable for long-term use.
Got Excellent Credit? Try a Rewards Credit Card
If you have established excellent credit, you may be receiving offers from a variety of credit card companies. If you know that you can financially handle another credit card and are looking to take advantage of the many perks and rewards available, you may want to consider applying for another credit card.
What to Do
Before you move forward, do your research on each one. Don’t get taken in by flashy offers that won’t benefit you in the long run. The best perks and rewards are the ones that suit your lifestyle. Decide which are most important to you and would give you the most bang for your buck.
Chase Sapphire PreferredÂ® Card
on Chase’s secure website
15.99% – 22.99% Variable
15.99% – 22.99% Variable
Snapshot of Card Features
Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 toward travel when you redeem through Chase Ultimate RewardsÂ®
2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases.
Get 25% more value when you redeem for travel through Chase Ultimate RewardsÂ®. For example, 60,000 points are worth $750 toward travel.
Card Details +
Ready to Apply? Go for It
Once you’ve learned how your charging and payment habits can affect your credit score, you can determine if and when the time is right for you to get another credit card. Our Credit Card Finder makes it easy to find the best card for your needs.
Find Your Credit Card
The post Should You Get Another Credit Card? What to Consider appeared first on Credit.com.
If your credit needs rehabilitation due to late payments, accounts in collections or other negative items, it might be time to rebuild. Rebuilding your credit requires an understanding of your current situation, identifying past mistakes and implementing the right strategies going forward.
Wise use of a credit card is one way to start. Surprising, right? But if you use that plastic correctly, it really can help you. Good credit card strategies include keeping a low balance, making payments on time and paying your balance in full each month. To do that, it’s best to start small and only charge things that wonât kill your credit building project before it takes off. (You can check on your progress with a free credit report snapshot on Credit.com.)
Here are a few things you can charge on your credit cardÂ to help you boost that score.
The cost of gas can add up, but if you already have room for gas in your monthly budget, you can charge your gas expenses and pay them off in full using the funds in your bank account. Some credit cards offer special cash back rates on gas purchases so you can earn a little money back in your wallet (although getting a new unsecured credit card might not be the best move for you at this stage as the inquiry will cause your score to take even more of a hit).
Groceries are another staple you likely already have built into your budget. Instead of handing over cash or a check when you pick up the necessities for the week, charge your groceries to your credit card and pay those purchases off in full each month. There are several credit cards on the market that offer special cash-back rates on groceries, as well.
Monthly streaming services usually cost less than $20 a month. You could conceivably set up your credit card to pay for a streaming service, pay it off in full each month and never use it for anything else.
If you have a large balance on a high-interest credit card, it could be damaging your credit score and affecting your ability to make your payment. If you have a lower interest credit card, you can transfer the balance and reduce the interest. If you can qualify, a card with a long 0% intro APR period can help you pay your balance off interest-free.
(Cheap) Dining &Â Recreation
It’sÂ probably not a good idea to use your credit cards at the club or restaurants, as itâs easy for costs to spiral out of control. But if youâre on a date at the movies or taking the kids out for mini golf and milkshakes, low-cost dining and recreation purchases might be a safe bet.
Small Everyday Expenses
Sometimes you have to run into a local store for a roll of duct tape or some socks. Small everyday purchases can be fairly easy to pay off in full.
Using Your Credit Card Wisely to Build Credit
For the most part, small purchases you can afford to pay off each time the statement arrivesÂ are the best things to put on your credit card, as payment history is the biggest influencer of your credit scores. Plus, carrying a balance means you’ll be hit with interest and it will take you longer to pay down your balance.
But even relatively small purchases can threaten your credit if they pileÂ up too quickly. (Credit experts recommend keeping your credit utilization ratio â that is, your amount of debt in relation to your credit limit â at 30%, ideally 10%.) So, a good practice is to treat your credit card like cash and only purchase things you can cover with available funds.
Have any questions about improving your credit? Ask us in the comments below and one of our credit experts will do their best to help.
The post The Best Things to Charge on Your Credit Card When Youâre Rebuilding Credit appeared first on Credit.com.