If you don’t have a credit card, you really should get one. Today, almost everyone in America has one, and so should you. Using a credit card is an important way to build better credit. But if your credit rating is so bad that you can’t get a credit card, don’t worry. Help is available. There are privately operated agencies that specialize in obtaining credit cards for “hopeless cases,” and they only collect a fee if they succeed. They’re usually listed in the Yellow Pages under “Credit Cards” or “Credit Counseling.”
These agencies may also advertise in your local newspaper’s classified ad section, or even in the big national papers such as the Wall Street Journal and USA Today.
If you cannot obtain a major credit card like Visa or MasterCard, you may still be able to obtain a nationwide retail card even without the help of a special agency. Wards or JC Penny credit cards are ofter among the easiest to acquire, and they are good at any of their stores across the country. A Sears card, though, is generally a little more difficult to obtain.
If you cannot obtain a national retail credit card, try going to a major local merchant, such as a department, furniture, or appliance store. Since they often have their own credit cards or charge accounts, you can try to open your own account with them. Since you live nearby, they may be more willing to issue you their card. You should then use it and pay a few monthly installments and then apply for a national card.
But if nothing else works, try this: Go to a bank that offers Visa or MasterCard, and ask if you could open a charge account with a credit balance. This means you would apply for a credit card in the usual way, and then send along with the completed application a check for several hundred dollars. Ask the bank first how to handle this.
What you are requesting is that the bank Visa or MasterCard extend credit to you in the amount already covered by your check. It amounts to paying in advance for charges in the future. After yo have exhausted your credit balance, be sure the bank is willing to continue extending credit in this fashion for as much of an advance deposit as you are able to make. After a time, your bank should be willing to extend a small line of credit to you without the necessity of depositing in advance. If so, be sure to make all future payments on schedule for whatever you charge to the account. This begins to establish a good credit history, which is the surest way to build better credit.
If you don’t have to start from scratch and already have one or two credit cards, you should ask for others from other national creditors, such as American Express or Discover. Also get another national retail card like Sears or even Home Depot. You can secure one type of card for each type of purchase, and you should definitely start using these cards wherever you used to pay in cash or by check. You want these purchases and your payments to be reflected on your credit report. Continuing to pay in cash or by check does you absolutely no good in terms of improving you credit rating. Use the cards with your merchants and send your checks to the credit card company. Then later, when you go in for your first mortgage loan, your excellent credit history will have already been estabished.
But you must be careful. Don’t go hog wild with all your extra credit cards. If you think you may have trouble keeping a handle on your purchasing, restrict yourself to the use of one or two cards only. Another “trick” of any potential major lender is to add up the credit limits for all your credit cards, which can be a fairly high amount. And even if you never use all those cards, a potential lender might easily think that you could be tempted by such high credit limits to go in over you head and obligate yourself to high monthly payments which you could never afford. So be careful. Evaluate your ability to make payments, and maintain only as many cards as you can handle.
Nowadays, because of the feverish competition among credit card issuers, many such companies have lowered their annual fees and interest rates to some very affordable levels. Sometimes there is no annual fee, and sometimes the initial rate of interest is lower than most home loans. Be aware, however, that those rates ofter increase sharply after six months.
You can easily find out which bank credit cards have the lowest fees by contacting Bankcard Holders of America. For about $4.00, this organization will send you a list of banks with low credit card monthly interest rates, and also banks that charge no annual fees. You may contact this group at: (540) 389-5445.
Something else you can always do to build your credit with the cards you already have is to ask for higher credit limits. You can always ask for increases in the thousands, but even if you credit card companies will only boost your limit by $250 to $500, it is still worth asking for. There is even good reason to believe many credit card issuers will increase your limit faster if you don’t completely pay your full balance due every month.
Here’s an idea you might try. If you normally pay the full balance due each month, the next time you charge a significant amount (over $100) don’t pay it off completely when you receive your next statement. Instead, make a payment that is 20 percent higher than the stated minimum monthly payment due. Keep making payments in this percentage range, and in six months or so you should automatically be given a higher credit limit without even having to ask for it!
One reason why you want to build up your credit card limits is for the convenience of the cash advance. What this amount to is an emergency short-term loan on your signature only. No collateral, no mess, no fuss.
When an extraordinarily attractive real estate investment comes along that requires a down payment or some repiar work, you can borrow on your credit cards up to their credit limits. You can take advantage of a lot of real estate bargains if you can quickly put your hands on five or ten grand. And this you can do with credit card cash advances. (Another way to get cash through credit is via overdraft protection programs, which are discussed later.)
Many or most credit cards charge higher rates of interest on cash advances, and some even charge a slight percentage of the cash advance itself as a service fee. Still, however, the advantages of having such instant access to goodly amounts of cash greatly outweigh the disadvantages. For example, buying property for only fix-up work using your credit cards to buy materials could prove to be quite profitable. Usually there is a 30-day grace period on your credit card balance before the company charges interest (although this may not be true for cash advances); but if you are only holding an investment property for as long as it takes to fix up and sell again, you could simply pay the minimum amount due each month-which includes that month’s interest-until the property sells, at which time you pay off the entire credit card balance and more than likely pocket a nice cash profit.
Using your credit card in this way will cost you at whatever their annual rate of interest is, which nowadays could be different for purchases as opposed to cash advances. But even if the interest they charge you is in the 18 to 21 percent per year range, when you apply that loan as a down payment on property that will earn over 100 percent per year return on your investment-it makes sense to use the credit cards, doesn’t it?