Tips and tricks to build credit using financial products including a retail card, secured credit card and credit-building loans.
The 3 best financial products to build credit
Building credit can seem like an impossible task. If you are building credit from scratch, it can be difficult to find the right opportunity for you to build from.
If you have bad credit, it can seem like an inescapable hole. Low credit often causes stress and financial obstacles.
Everybody wants to have a good credit score range, but getting there can be daunting and often feel never-ending or impossible to crack. Luckily, there are some viable and easy solutions to build credit using helpful options provided by your credit card company or bank.
Some helpful choices includes a secured credit card, retail credit card and credit-building loans. If used appropriately, these products can help start off your credit score in a positive way or continue to build you up from a low credit score range.
Here’s what you need to know:
1. Secured Credit Card
A secured credit card is a type of credit card that operates via a down payment and is available at most banks.
If you were to loan a secured credit card for $500, the spending balance of that card would be $500. While there is a limit to the amount you can spend, the safety in this type of card is a positive for both parties. This is considered a secure option because the down payment of the card indicates an ability to cover the balance of the card when necessary.
A credit card in which you have already covered the down payment of is much easier to cover in the future. This way, it’s difficult for a secured credit card balance to get out of hand.
If you were unable to pay off the balance of the secured credit card, the issuer would simply use the deposit money to cover the balance on the secured credit card. Therefore, the balance of a secured credit card can be covered even if it gets out of hand.
If used properly, these cards can often transfer into unsecured credit cards when a positive credit record has been accomplished. Check out some tips on best secured credit cards to build credit in Canada.
2. Retail Credit Card
A retail credit card is also known as a store card. The intent of this card is for it to be used for a single retailer or a group/conglomerate of retailers.
Companies will partner with a bank or credit card company and if used, cardholders typically receive discounts or reward points when you buy products from the retailer using said retail credit card from the partnering company.
Your balance is typically only going towards one specific company or series of products.
A retail credit card can be incredibly beneficial for routine and important items depending on your lifestyle. Having a retail credit card for things like groceries or airfare can not only help boost your credit, but it can also give you returning customer rewards and benefits.
It is a safe option for building your credit score range because the purchases are only from one retailer or group of retailers.
The balance can still feel controlled by the user because it is only going towards one retailer routinely. These types of cards are fairly easy to obtain and available through most large, partnering banks.
3. Credit Builder Loans
A great option to help improve credit comes in the form of a credit-builder loan.
Credit-builder loans are loans that are paid for before you are able to use the money on the loan, often times through multiple payments, as a way to receive a larger sum of money through a loan later while simultaneously building credit through paying off a loan in a timely fashion.
Credit builder loans are a practical option for a bank to give to someone with bad credit or someone building credit from scratch, because the loan will be paid for before it is received.
When it comes to giving loans to a bad credit score user, they are more willing to give out a loan that is pre-paid as opposed to one that is paid for later because it is more likely to be paid off in full.
Typically, the balance of the loan is deposited in a bank and after the loan is paid off, the loan can be used. Credit builder loans are a great way to start building credit from scratch. The most important aspect of this type of financial option is making sure the loan payments are paid on time.
Building credit can be tough. With safe and helpful options such as a secured credit card, retail credit card or store card and credit builder loans, there are options available to build credit with the help of your bank or credit card provider.
The most important aspect, as always, is making sure to pay off these options on time.