There are several ways in which a person with a bad
credit store cards score can increase it. Usually this is more
time-consuming than you can afford. A store card can be a much quicker method
for raising your credit score. We'll come to that in just a bit.
You'll want to start by learning how credit bureaus arrive
at credit scores. Your "debt-to-credit ratio" is a major
consideration in determining your credit score. Simply put, this is the amount
of money you owe, divided by the amount of money lenders are willing to loan
you (credit limits). The higher your debt-to-credit ratio is, the less stellar
your credit score will be. Say you have $10,000 in unsecured revolving accounts
(for instance, this would be the total of all your credit card limits), and you
owe $9,000 on those accounts. You would have a high debt-to-credit ratio at
90%. This will affect your credit score negatively. Lenders prefer to see a lower
ratio of debt to credit limit.
You could pay off a large portion of your debt to reduce
your ratio, but most likely, that wouldn’t be feasible. Another way to get a
better debt-to-credit ratio is to increase that amount of credit available to
you by getting a new credit card with a higher borrowing limit. Regretfully,
you won't have an easy time doing that with your credit history. A best store card offers another option.
Even individuals with bad credit history may be eligible for such store cards.
The only restriction is that you can only buy items from the company that gave
you the store card.
For example, first you receive a $7,500 card from a store
card issuer. Then you see something you want to buy with a price of $500. You
make a down payment in cash and pay for the rest with your sub-prime card. The
amount of your new credit line is sent to the major credit bureaus, which
raises the total amount of credit available to you. And, if you keep your
outstanding balance on the credit line low, your debt-to-credit ratio will get
lower too.
However, you need to understand several things regarding store
cards. To begin with, it's not like carrying a MasterCard or a Visa card. These
store cards are not valid at your neighborhood Walmart or grocery store. These store
cards can only be used in the stores that issued them. So be certain that this
vendor is selling what you need and that they sell at reasonable prices.
Another very important thing to consider when you are looking at store cards is
whether the lender maintains ongoing reporting to the major credit bureaus.
Most top store
cards issuers report to the major credit bureaus. That's a crucial step, or
else your efforts won't amount to anything. The major reason to use a store card is for the credit reporting bureaus to record your new
higher credit line and your reduced debt-to-credit ratio. After that, you'll
notice your credit score rising relatively quickly. It is a perfectly valid and
effective approach to achieving this goal.
