While most people associate credit cards with the risk of a worsening credit score, there are actually ways to use cards to increase your credit profile. In fact, borrowing and making repayments correctly is actually better for your credit score than never borrowing at all, since lenders look for evidence that you can pay back amounts owed on time.
One way to do this is with a credit builder card. While these cards have higher APR attached meaning they are not useful for long-term lending and may have a lower credit limit, they are very accessible for any kind of credit profile and they can be an easy way to build your credit score while also accessing a source of liquidity in the meantime.
As mentioned, these cards have higher interest rates so it is very important that you do not overspend or fail to repay on time or the card could have the opposite effect as intended. If used correctly however, they are a great way to open up the possibility of other lines of credit in the future.
The same benefits can also be said of any card. It is worth remembering that if you use any card wisely and avoid fraud (which can be detected by checking your credit file and statements regularly) then your score will improve over time.
The longer your credit history of good repayment, the more lenders will view your applications as creditworthy. No credit history is sometimes just as bad as a patchy record of repayments.
There are other simple ways to improve your score:
Another good step to improving your credit scire is checking for errors in your file with the three main credit scoring agencies: Equifax, Call Credit and Experian. You can even get an instant improvement in your score if you can show some details in your file are incorrect, in which case the company will make the necessary adjustments.
Even if they do not change your score, you can add a “notice of correction”, in which you add a note to the detail that you dispute so that when another lender views the record they will see an explanation of your dispute. You are entitled to a free check per year of your file with each of the main agencies.
These are all good ways to increase your creditworthiness in the eyes of lenders, and in particular credit builder cards are a great way to show you can make repayments as planned. And keep in mind that any credit card used wisely will increase your score over time.