Moving Up: How to Rebuild Credit

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In the last issue, I explained how your credit may hurt your chances of finding employment. Most of you have probably had similar encounters with having your credit keep you from getting into housing. The important thing to focus on is how to fix it so you can get your life going in the right direction.

There are several ways to fix credit but the easiest way is to get a secured credit card, which is a type of card that is available to people with bad credit.

Why should you get a credit card? There are several reasons. First, it will keep you from having to use alternative methods of borrowing (such as payday loans). Second, it will help dramatically when you try to travel. If you have to go out of town, you will need to have a credit card to rent a car (you may be able to get a hotel room without a credit card) Third, it will help if you find yourself short of money at the store, for example you are at the grocery store and find you have not enough money. You can use your card to buy what you need and pay it back right away.

The other methods of building credit are too expensive. Some people will try to build credit using a lease-to-own option at a place such as Aaron’s (there is one in the District and many more in both Maryland and Virginia). You will be paying a large amount of money for an item that you could purchase for much less at another retailer. Buying a car at a “buy here, pay here” lot is another very expensive way to obtain credit.

Getting a secured credit card is a very simple and affordable way to get back on track and rebuild the credit you need and deserve. The secured credit card industry is much better than when it started. At the beginning, there were only a few banks (usually ones that did not have branches and you had to deal almost exclusively by mail and phone), but many banks today offer secured credit cards including many of the largest banks.

To get a secured card, you just need to fill out an application and you will give the bank a deposit (banks usually require around $300 minimum and you can increase it in the future) and then once you are approved (which almost always it is since you are funding the account) you receive a Visa or MasterCard with a credit limit that is equal to the amount that you have given to the bank. Bank of America, U.S. Bank and Wells Fargo all offer secured credit cards. The interest rate will vary (Bank of America is 20.49 percent, U.S. Bank is 19.24 percent and Wells Fargo is the same). U.S. Bank also has three cards that can earn you frequent flier miles with AeroMexico, LAN and Korean Air.

There is also another major credit card you can get to build credit and that is a secured card from Discover. They are one of the major credit cards that can help you dramatically repair your credit. They also are unique because their minimum deposit is only $200. The procedure is the same and one important feature that Discover offers you is that it tells you your credit score on your monthly statement and on their app. This will help you improve your credit since you will see what the lender you are applying to will. One important thing to also remember is no matter which of these banks I have mentioned (or Discover) you choose, they will report to all three credit bureaus and that is what will improve your credit. Discover and U.S. Bank have no annual fee for their cards (though U.S. Bank’s offer is only on the first year, then it is $25 annually) Bank of America charges $39 and Wells Fargo charges $25.

If the deposit is a concern, remember this: after 12 months they will review your history (and probably check your other credit too) and if you qualify, then your deposit gets returned to you and your card becomes an unsecured card.

Credit is such an important and necessary tool to function in the world today. Next issue, we are going to look at volunteering and how it can potentially help you gain employment in the future.


Issues |Housing|Jobs


Region |Washington DC

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