Secured Credit Cards
Obtaining a secured credit card can help you build or rebuild your credit. A secured credit card allows an individual to deposit a sum of money with a financial institution to be used as collateral. The collateral provides the financial institution assurance that in the event a payment is not made, the deposit could be utilized.
Certificate of Deposit (CD) Loans
Certificate of Deposit (CD) loans work in the same way as secured loans. If you are unable to obtain a traditional loan, you can request for a CD loan from your bank for the purpose of building your credit.
For example, let’s say you have a desire to finance a car for $5,000. However, because of your credit you are unable to do so. In addition, it is also your desire to build or rebuild your credit. In order to obtain a CD loan, you make a $5,000 deposit into a certificate of deposit with the bank. The bank will set payments and rate terms for the new loan. During this time, you will make payments just like a traditional loan, but will not have access to your funds.
Installment or student loans
An installment loan is an agreement to borrow a set amount of money and make periodic payments. Examples of an installment loan are car loans, mortgages, or student loans. Since these types of loans require multiple payments over time, timely payments can help build or rebuild credit.
Keep in mind, it is important to make certain the financial institutions report to the national credit bureaus. This way, you can ensure your credit rating is benefiting from exploring these options.
– Kemberley Washington, CPA is the author of The Ten Commandments to a Financial Healing.