Improving Credit History with a Credit Card

A strong credit history is something that we all strive for. It allows us more buying power for homes, cars and other large purchases. Interest rates are lower which mean money is saved. But what if you don't have good credit history or well-established credit? Are you doomed? No, of course not. There are credit cards that can be issued to  those considered a higher credit risk and allow you to, if done responsibly, start building a strong credit history.

Heather, a 25-year-old just in her second year of her career decided she wanted to buy a car in the next year or so but was afraid that her lack of credit would hinder her ability to do so. In a way, she was right. Without credit, large purchases are virtually impossible to make unless you pay with cash. Although Heather had a decent salary there wasn't any way she'd be able to save up the kind of money necessary in the next year to pay for the car in its entirety. Most people can't but that doesn't mean that they don't buy cars. Heather decided to apply for a credit card to acquire some buying power. After asking around and researching her options, she decided to apply for two credit cards at smaller, local businesses including a department store and kitchen depot. Because her financial abilities were still unknown to creditors she was considered somewhat of a risk. By applying for smaller-based business credit cards, she was able to quickly charge new purchases and pay off the monthly balance in full. She requested that both her credit cards report her activity to credit agencies in order to establish a strong credit rating. Within a year she received a handful of credit card offers and is well on her way to building a credit history.

Nick, a 39-year-old teacher and father of two used to have satisfactory credit until he was suddenly laid off from his job. Although his wife worked full-time, the obligations of providing for his family finally depleted his savings account so he turned to his two credit cards. After seven months of unemployment, Nick began having trouble keeping up with his card payments. Within three months he reached the credit limits of both of his cards and was repeatedly charged over-limit fees. Within a few months his credit rating decreased dramatically as creditors began to see Nick as a credit risk due to his inability to remain within his limits and pay on time. When Nick found a job, he immediately closed both accounts so that he could start to pay off his cards. Unfortunately, the damage was done. A year later, Nick felt like he needed at least one credit card to start rebuilding his credit however, he had difficulty finding a creditor willing to start a new account with him. Nick read that a Secure Visa or Master Card has been issued to those with poor credit history. Although the interest rate was higher and there was an application fee, he decided to accept this type of credit card for the purpose of rebuilding his credit rating. The creditor gave Nick a decent credit limit based on the deposit he made upon starting his new account. He was diligent about paying his monthly balance in full on time, every time. He avoided the pitfalls of high interest rates by paying off his card every month and began re-establishing a positive credit rating. Because Nick demonstrated his ability to be financially responsible his creditor reported his activity to credit agencies. Within a year, Nick was able to reapply for an unsecured credit card and resume his standing at a reasonable credit limit with average interest rates.