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Credit Builder Credit Cards 101 Guide

Credit Builder Credit Cards 101 Guide

Check out our Credit Builder Credit Card 101 Guide and learn how to build credit today! Are you struggling to earn a good credit score? If so, you may want to ask your trusted bank regarding their credit builder cards. 

What’s more, you can try our other tips on polishing your credit history, so you can earn an excellent credit score!

How can I Fix Credit Myself?

Before we tackle the ways you can fix your own credit, we first have to clearly define what credit is. When folks talk about credit, they usually mean their credit ratings. These are three-digit numbers found on the reports their credit bureaus issue them. 

Those consist of a number of factors that you improve in order to enhance your credit.

The most important ones are your payment history and credit utilization. They occupy a large portion of most credit scoring systems. After all, credit reports are supposed to help lenders identify risky borrowers. If you have a punctual payment history and minimal credit utilization, you’re likely to repay your creditors.

You can improve those yourself by changing your spending habits. If your personal finances are particularly dire, you could also request certain services from financial institutions. Either way, you should check every viable method to improve your credit. 

You may also want to check your respective credit bureau since they have scoring systems distinct from one another.

Complete Payments on Time

Roughly 30% of your credit score consists of your prompt and late payments. In fact, most financial advisors recommend this when teaching how to improve credit. The rating increases from your diligent payments since it shows that you’ve repaid creditors before. 

If you’re struggling to pay on time, you may check out credit builder cards or other credit improvement methods.

Minimize Your Credit Utilization

Approximately 35% of your credit rating is based on the ratio between your used credit and your credit limit. This is called your credit utilization and your percentage should stay below 30%. 

Your credit bureau’s scoring system may have different requirements, so check its specific guidelines. Nevertheless, using credit minimally will help you boost that credit score and keep it that way.

Ask for a Cosigner

You may ask someone you know to cosign loans so you can start improving your credit report. It may be hard to be approved for loans due to your bad credit score.

However, you need to use credit in order to improve the corresponding score. Fortunately, others with better credit can help by signing loans with you. 

Request for Authorized User Status

You can ask your friends and relatives with better credit to include you as one of their credit cards’ authorized users. This can be risk-free for the other person since you won’t need to use the card. 

Becoming their authorized user could improve your credit without jeopardizing their finances. Keep in mind that its effects have been minimized, so you may need to use other options as well.

Credit Builder Loans

Surprisingly, a particular loan is one of the ways on how to build credit. Some have poor credit due to their overdue loans, but credit builder loans may score you better credit instead.

Credit Builder Loans

Take one out, pay the installments on time, and then receive your money upon completion. 

Aside from this, you may ask your bank for credit builder cards and other helpful products.

Secured Credit Cards

There are credit cards that may help you improve your credit. You can apply for secured cards by registering with the deposit required. Then, you may use it like regular unsecured cards and repay your balances punctually. 

Keep in mind that some banks don’t offer this service, and you should check if your credit bureau counts them in scoring.

Do-It-Yourself Debt Payoff Techniques

Your numerous debts may be keeping your credit score down, so why not pay them off first? You could be struggling to stay current on their payments, barring you from a better rating. 

Luckily, there are techniques such as the debt snowball and debt avalanche you may try out. You can check out various free websites regarding those methods and more.

How to Build My Credit with Credit Cards?

Whether you’re using a secured credit card or any of the regular ones, building credit with them remains the same. What sets them apart are the terms and conditions each card has. 

Make sure to discuss with your creditor at length regarding your credit card. You’ll learn how to effectively use the card to improve your credit, and you may learn about other helpful methods.

There are more ways on how to build credit with your credit cards. We’ve mentioned paying on time, keeping utilization down low, and using special ones like credit builder cards.

However, your bank must also report regularly to major credit bureaus. Know when they submit your data to make sure your payment updates are included.

Don’t make credit inquiries often, as those can negatively impact your credit as well. Only perform checks whenever you absolutely need to, such as credit card applications. Moreover, you may check if your credit institution will perform a soft credit check for your transactions. 

These have no impact on your credit report, unlike hard credit checks.

You should also check your credit report regularly to help you improve your credit. Fortunately, most credit bureaus allow you to obtain an online copy for free. This will enable you to keep track of your records and learn what improvements you need. You might even find an error that you can dispute with your credit bureau.

What is a Credit Builder Credit Card?

We’ve discussed some types of credit cards that are actual ways on how to build credit. Banks provide ways for people to improve their credit, including credit builder credit cards. 

Credit Builder Credit Card
Two people talking about credit builder credit cards and who are they best for.

They lower the requirements for these plastic swipers, so you may receive one even with low or no credit. Then, you may proceed with boosting your score using the tips we’ve provided.

Who are They Best For?

Credit builder credit cards are intended for people who need to build or rebuild their credit. Perhaps they filed for bankruptcy in the past or they had insurmountable debt problems then. 

Worse, they may have received a county court judgment that is complicating their credit improvement. Though people with no credit history may also use them to create an excellent record.

Do Credit Builder Cards Work?

It will be up to you if credit builder cards will improve your credit score or not. Credit builder cards are just easier to acquire compared to regular plastic strips. 

They generally have lower requirements compared to most credit cards, so those with bad credit may acquire them. You still need to use your credit card responsibly in order to build your credit effectively. 

Make sure that your credit card company reports to your credit bureau though. These companies are not obligated to submit info to these institutions. If you get your card from such companies, it may become useless in improving your credit. 

Ask your bank if they will submit your payment updates to bureaus, so you’re sure the card helps improve your credit.

What to Look for in Credit Builder Credit Cards

As with all ways on how to build credit, you have to make sure your card can truly help. This means you should check your credit builder for certain card offers. These include its annual fees, interest rates, and minimum payments.

What To Look For In Credit Builder Credit Cards

Discuss with your card issuer regarding their qualifying criteria and outstanding features and canvass for multiple alternatives.

Of course, you have to check your bank’s requirements for credit card eligibility. You’ll have to qualify for them in order to use their cards after all. You may also check if you can apply for their direct debit service. 

This will ensure you don’t miss any payments, so you can avoid incurring hefty penalties.

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