More and more students today graduate with a large amount of credit card debt. The expenses of living post-graduation can do even more damage to those cards, as graduates must find ways to fund housing, utilities and other new costs. When credit card use turns into abuse, however, young people can easily find themselves strapped with a poor credit score before they even start their post-college lives. If you have a low score, however, try not to despair. There are ways to improve your credit.
Your credit score is a number between 300 and 800 that represents your level of reliability when it comes to taking out loans and paying back debt. It is calculated based on the amount of debt you currently have and your past payment records. The national average credit score is 675, and a good score is considered to be over 720. If your score is below 620, you are considered "sub-prime" and may have a difficult time getting loan approval, good interest rates, signing a lease or even getting a cell-phone contract. Because of this, if you have bad credit, it can make life very difficult.
In order to rebuild your credit score, you first need to start new credit. If you can't get approved for another credit card, there are many options.
Try to take out a secured card. Secured credit cards require a deposit in order to provide the lenders with security in case you can't make payments. You credit line will usually be 50 to 100 percent of the deposit. For example, if you make a deposit of 500 dollars, you will have a credit line of at least 250 dollars. Many secured cards can be transferred to unsecured cards after one year of consistent, timely payments. Secured cards do have many fees associated with application and approval, so be wary. Also, make sure the creditor reports to all three major credit bureaus. If they don't, the good credit you are building up will not be recorded. The Federal Deposit Insurance Corporation provides contact information for all three major bureaus at FDIC.gov.
Another option is a department store or gas credit card. These credit lines are easier to get approved than traditional credit cards. They do, however, come with higher interest rates and apply a finance charge when your balance is not paid in full. However, if you only charge what you can afford and pay your balance completely each month, these cards can be great ways to rebuild your credit score.
You can also apply for credit cards that are aimed toward people with low credit. However, make sure to do your research, as many of these lenders seek to trap people with interest rates so high that it makes paying back debt impossible. Also, again, make sure to chose a card that reports to all credit bureaus. A good option is the Capital One Classic Platinum Credit Card. It is designed for people with a credit score of 620 or below. It does have high interest rates and an annual fee, but it is a legitimate card and will improve your credit score if you manage your payments wisely.
The next thing you need to do is change your borrowing habits. The entire point of getting a new credit card is to rebuild your credit, so don't use the card as if your credit is stellar. Only take out one card and charge things that you know you can pay back. Stay within 30% of your credit limit to maintain your credit score, and don't use your card for everyday purchases. Also, when you pay your bill, make more than the minimum payment. Put as much as you can afford toward paying down your new card in order to decrease the impact of interest and show creditors that you are serious about making payments.
The Federal Trade Commission provides information about consumer rights and advice to those looking to improve their credit at FTC.gov.