A credit card; that thin rectangular card issued by a bank in your wallet that you use to borrow and transfer funds when you want to purchase goods or even services. So, how does a credit card work? Well, cardholders have to return the amount borrowed plus additional interest charges gradually or at once. Furthermore, banks offer a line of credit through which the cardholder can borrow funds in the shape of cash advances. However, they do have more interest rates or no grace periods.
Credit Cards: Types
A variety of cards can get issued, but one needs to understand which one they need. There are reward credit cards that offer benefits like airline miles or discounted hotel rooms. Many companies provide branded cards to their customers; this maintains their loyalty. Store credit cards are more accessible than major ones. Another type is secured credit cards; these cards have a security deposit, so the amount you can borrow is equivalent to your security deposit. A prepaid debit card resembles a secured credit card because it has a secure payment as well.
Credit Score
The amount that a cardholder can borrow is limited and pre-set by the company issuing the credit card. This amount varies from individual to individual and with its basis on some factors. The most significant factor is a card holder’s credit rating or simply their credit score.
Credit History
So, how do you get a positive credit history and end up with a good credit rating? Credit cards, no matter the type, if used responsibly, can help cardholders build a significant and positive credit history, which aids you in purchasing goods and services offline and online. For example, your purchases and how on time your payments are; help you build your credit score. In addition, a good credit score can land you a more extended line of credit and give you access to more rewarding credit cards.
Poor Credit Standing
Well, when you get a credit card, you can use it in any way you like. If used responsibly, it can help you get a better credit score. But if you use it irresponsibly, it can give you poor credit standing. A bad credit score will not help you in any way. Instead, it will most likely be the reason companies would stop offering you a high amount of credit on your credit cards.
Credit Repair
If you have unfortunately lowered your credit scores a lot, what are you supposed to do now? Well, some companies can help you with Credit Repair. The reason behind your deterioration of credit score can be many. It could be false information with your issued companies or perhaps identity theft. Or the problem can be on your side, and you would probably need to tackle financial issues like budgeting to get your credit score fixed.
Credit repair: how it works
You can repair your poor credit scores in many ways; some of the steps you can take are as follows:
- Get hold of your credit card report; most companies issue a free credit card report annually.
- Find errors in that report (if any)
- Get rid of your late payments, so if you have any amounts still due, try to pay them off as soon as possible.
- Think about increasing your credit card limits.
- Or move on to getting a new credit card.
- Pay of the new credit card amounts on time.
The world of credit cards is complicated, and one should probably do their research before getting one. Then, after obtaining one, be sure to pay your balances timely to maintain a good credit score.
