Step #5: Build New Credit

When it comes to repairing your credit, there are two sides of the coin. On the one side, you want to eliminate as much negative information as possible. This is why you tackle things like past due accounts and high credit balances.

On the other side, you also want to add positive credit data to your credit report. If you consistently do things like make on-time payments, your credit score will go up.

So, how do you get new credit? One simple way is to get a new credit card, make purchases, and then make payments on time.

When getting new credit, consider these important points:

1. You absolutely MUST make your payments on time. If you don’t, you’ll only be hurting your credit score even further. If you don’t think you can make payments on time, don’t get a new credit card.
   
   
2. Avoid applying for too many credit cards at one time. When you apply, a “hard” inquiry is made on your credit, which goes on your credit report and can pull your score down slightly.

So, with that being said, you can build new credit by applying for a credit card from one of the major companies (Discover, American Express, Visa, Mastercard, and more).

When searching for a card, look closely at:

• Recommended credit score. This will help you know the odds of being approved for a particular card.

• Annual fee. Some cards require you to pay a fee every year.

• Annual Percentage Rate (APR). This is the interest you pay on purchases.

If you don’t get approved by a major credit card company, you have a few other options.

You can apply for a “secured” credit card. With these cards, you have to put down a security deposit that will be used if you fail to make your payments. If you faithfully make payments on time for six months or so, you’re often given the option to upgrade to an unsecured card.

You also might consider getting a retail credit card, such as a Walmart or Amazon card (or another store you prefer). These cards are often easier to get than cards from the large credit companies.