Often time people are misguided to think that credit cards can be the best option to rebuild their credit. When you think about why most people have bad credit scores, one of the main reasons that come to mind, are credit cards.
So why is it that many people think they could change their habits with the snap of a finger or by opening a third or fourth credit card? In most cases this tends to be more trouble overall.
What are the advantages of a credit card?
- If used correct they can help to establish credit
- They allow the chance to purchase with credit
- In the case of an emergency they can be a source for payment
When rebuilding your credit score, there are many more options than most people think. Just a few of those ways are, unsecured or secured credit cards, personal loans, auto loans for bad credit and getting a better handle of your finances. No matter the option that you decide to choose, you still have to make a monetary structure change. So a budget plan is most likely needed, it helps to keep things organized.
Interest Rates Can Be Higher While Rebuilding Credit Status
Credit cards tend to have annual fees along with monthly interest rates. The only way to lower interest rates on a credit card is by opening another card with a lower rate, or transferring your balance to a lower APR card. When talking about lower rates or payments on bad credit auto loans, this can be handled by refinancing your auto loan. This would be the best option and can be discussed at the dealership you initially went through for your personal bad credit auto loans. No matter the types of items on your credit report there are ways to go. You must decide for yourself which options are going to be most valuable to you.
An auto loan is more than a way to rebuild your credit; it is an investment in your financial future. Auto financing is a form of installment credit. The borrower agrees to make set payments each month, which tend to be a higher amount than credit cards. A car can be traded or resold with the hopes of making money after completely paid off.
With prompt payments, and extra care for the vehicle, you can start repairing your credit and hold positive equity with this investment. A bad credit car loan is your next step to the nice car you want, a lower interest rate, and most importantly, building your credit score. At first it may seem as though you are throwing extra money away in interest, however, the benefits are worth the extra money you will be spending in the end.