If you’re in college and dealing with bad credit, you’re undoubtedly hoping to graduate with a higher score. Doing so isn’t quite as difficult as you might think, especially when you know a few “tricks of the trade.”
You’re not the first to deal with bad credit, nor the first to correct the situation. Thankfully, you’ve realized where you are now and what you hope to accomplish.
Follow these steps and you’ll be on your way to that elusive 700+!
1. Check your credit scores
Your FICO score is determined by a proprietary combination of information obtained from the three major credit bureaus: Experian, Equifax and TransUnion.
To get a good idea of where you currently stand, visit AnnualCreditReport.com, where you can request your free annual report from each bureau.
The scores you see won’t exactly match your FICO score but they will all be pretty close. There are a variety of other companies that allow you to check your credit score, as well.
2. Figure out if your credit is as bad as you thought
If you have a credit score above 640, you’re actually in pretty good shape and should be able to qualify for many “average” credit cards, including those with low interest rates and no fees.
Try applying for one or two of these before moving on, as they will prove far more affordable in the long run.
3. Accept “the price of credit”
Having good credit means saving a lot of money. However, if you’re stuck with bad credit, you’re going to have to “buy” your way into the “Good Credit Club.”
How much does membership cost? Well, it all depends on which cards you’re accepted for.
- You may need to pay an annual fee to keep the card active.
- You’ll likely be subject to interest rates as high as 36 percent.
- A security deposit is often required, ranging from $25 to $500.
4. Avoid scams
Unfortunately, there are lots of prepaid debit cards and gift cards that are marketed toward college students with bad credit.
If you’re able to purchase the card at the gas station, convenience store or mall, it’s almost certainly not a credit card.
Always read the fine print carefully and verify you’re receiving a line of credit — and not a prepaid gift card or debit card. They have absolutely no impact on your credit score.
“If you have a score above 640, you should
qualify for many ‘average’ credit cards.”
5. Find the right card for your situation
Even if you have bad credit, there are plenty of lenders willing to extend you credit. Check out their offers here, but remember to take on new debt responsibly.
6. Make your monthly payments on time
Hopefully you’ve already learned your lesson and have established healthier financial habits. Whatever you do, make sure you pay at least the minimum payment on time each and every month.
With many of these cards, your interest rate can be increased if you miss even a single payment and your security deposit may be forfeited.
Making your payments on time, every time, also helps to boost your credit score — meaning you’ll soon be eligible for lower interest rates, saving you tens of thousands of dollars during the remainder of your life.
7. Check your credit score again next year
Now that you’ve been paying your bill for 12 months, it’s time to visit AnnualCreditReport.com again to check in on your credit score.
If it’s hit at least 640 or above, you may want to consider applying for a new, better credit card with a lower interest rate.
Look for those that allow you to transfer your balance. Close your old secured credit card, especially if it has annual fees.
However, be aware that doing so will lower your debt-to-credit ratio, resulting in a temporary drop of your score.
8. Continue making your payments on time
Now that you’ve moved on to bigger and better credit cards, continue to keep your financial house in order.
Make your payments on time and check your scores every year. Eventually you’ll qualify for non-revolving credit, and your score will improve significantly.
Remember to always use a budget to keep yourself out of financial difficulties and you won’t have to work through this routine again in the future!
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