Do not max out your credit card.  Did you know that maxing out your credit limit can deduct anywhere from 10 points to 45 points from your credit score, depending on your current rating?  Credit utilization makes up 30% of the FICO score so this is not a surprising fact.

If you would like to maintain a score of at least 720 and above, you should be very careful with how you use your credit limit.  Experts recommend keeping credit usage minimal, as much as possible below 40% of your available limit.

Don’t be late.  This may be an obvious tip but many people are still guilty of late payment.  Missing your due date can slash off anywhere from 60 to more than 100 points from your credit score.  The highest percentage in the FICO scoring system is payment history at 35%.  Just imagine how much you will be hurting your credit score if you fail to pay a bill on time.       This is true not just for credit card and loan payments but for all types of debts (electricity, cable, internet, etc).

Cancelling a credit card.  You might be thinking about cancelling one of your credit cards because it has a high rate or because you already have new credit cards.  Before you pick up that phone and request to cancel, you should be aware that your credit score can suffer.

If it’s an old credit card you’ve been using for years, closing it now would mean erasing the old parts of your credit history.  The length of credit history takes up 10% of your FICO score so you could be penalized for losing those precious account activities.  Instead of cancelling, consider keeping the card, using it only for a small purchase.  Be sure to pay it off in full right away so you won’t need to pay the interest rate.

Not having a variation of credit accounts.  If you only have credit cards in your name, it would be hard to boost your score.  Types of credit used makes up 15% of your overall credit score so it is recommended to acquire different types of accounts in your name.  Of course, timely payment for each account is crucial to maintain excellent credit.

Seeking debt settlement as a solution.  Resolving a debt problem through settlement can be an option but you should be aware that such a move will damage your personal credit score.  If you have higher score, you could lose up to 125 points if you settle.  Thus, before taking a step forward, weigh the matter carefully and see if the advantages of debt settlement far outweigh the damage it can do to your credit score

MYTH:  You can’t have a bad credit score if you are financially responsible.

This is not necessarily true.  Some behaviors which might seem like a good strategy to manage your finances can be bad for your credit.  For example, not using a credit card at all will not help you in building your credit score.  To build a solid credit score, you must prove your capability to handle debt and credit.  Thus, not having any debt at all may seem like a safe way to avoid debt problems but you won’t have a credit score.

MYTH:  A lower credit limit is better because it discourages overspending.

In line with the first myth, this is an example of a behavior which might seem like good for your finances but bad for your credit.  30% of your credit score is based on credit utilization.  Ideally, you should have a low credit-to-debt ratio to keep your credit score in good standing.   However, if you have a low limit, it can be difficult to keep this ratio at a low-level especially if you only have one credit card.  A higher credit limit  will be an advantage as long as you know how to use it in control.

MYTH:  Checking your credit will pull down your score.

Not true! Hard inquiries or inquiries made creditors in response to your application can affect your score.  However, checking your own credit will not hurt your score at all.  In fact, consumers are advised to check their credit regularly to make sure that all information contained in their report is accurate.

MYTH:  Carrying a credit card balance improves your credit score.

This is a dangerous myth to believe in because it encourages credit cardholders to leave balances unpaid, increasing the risk of debt build-up.  The reality is that carrying a balance from month to month will not boost your credit score.  The only thing it does to a card holder is make you pay additional interest rate charges.  The best way to manage credit card debt is pay your monthly balance in full, leaving no balance at all.

MYTH:  All you need is a credit card or credit cards to build credit.

Aside from revolving credit, managing different types of credit in your name is a great way to prove credit-worthiness.  You do not need to own multiple credit cards to raise your score.  One or two credit cards should be enough, depending on your needs and lifestyle.

The types of credit used makes up 10% of the FICO score.  Therefore, having at least one or two types of loans (car loan, personal loan, or mortgage) in your name will strengthen your credit history and credit score, assuming that you are consistent in submitting with your monthly loan payments on time.

Know where you stand.  Have you checked your personal credit report? If you have not yet requested your free credit report for this year, you can go to www.annualcreditreport.com to order.  You can order all your three reports from the three major credit bureaus at once so you can be sure that all versions of your report contain accurate information.

Checking your report will make you aware of your exact situation.  Perhaps your credit is not as bad as you think, or maybe it might need more serious work.  With a copy of your credit report on hand, you can evaluate each of your accounts and plan your strategy based on that.

Are there errors or unauthorized charges in your report?  If so, you should send a dispute letter to the credit bureau that issued your report right away.  Fixing an error can instantly boost your credit score.

Pay your credit cards in full and on time.  Contrary to what others think, you don’t need to carry a balance to boost your credit score.  You also don’t need to use your credit card for expensive purchases to achieve a high score.

What’s most important is how you pay off your credit card balance.  It’s best to pay off your full balance each month so you don’t incur interest rate fees.  Use your credit card for a small purchase so that repayment need not be a burden.

Avoid hard inquiries.  If you need to acquire a new credit card or a loan, do not submit multiple applications to different lenders at once.  Doing so will only damage your credit score even more.  What you want to do is spend time comparing your options and once you have the right lender, that’s the time you can submit an application.  Don’t forget to check the lender’s credit requirement to avoid unnecessary rejections as this will also pull down your score.

Keep credit usage minimal.  You want to use your credit regularly but you should keep it as minimal as possible.  In fact, you should not use more than 30% of your available credit if you want to see an improvement in your rating.

Apply for a small loan.  Aside from revolving credit, adding other types of debt to your name is a great way to improve your credit score.  An installment loan whether a personal loan, student loan or a car loan gives you the chance to prove your creditworthiness through timely submission of your monthly payments.

Acquire a small loan with just the right period of repayment.  Choose a lender that offers a reasonable deal.  Furthermore, make sure that the loan provider reports to the three major credit bureaus.  As you submit your monthly loan payments, you will strengthen your credit history and add points to your score.

In this article, we present tips to help you get out of bad credit within the first quarter of 2012.

Know what you’re up against.  Order your personal credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion).  If you have not yet received your free report in 2011, you should exercise your right and request for your free annual credit report at www.annualcreditreport.com.

Checking your report will help you see the real situation.  Perhaps your debt problem is not as worse as you thought it was after all.  Or maybe you’ve been shrugging off the problem and upon seeing your report you might realize that you really need to take action immediately before things become worst.  Whatever the situation is, this first step is important so you can decide what specific steps you should do to get yourself out of bad credit.

Clean up errors from your file. In case you discover errors or outdated information in your credit report, you should send a dispute letter to the bureau that issued your report. Fixing errors in your credit history can instantly improve your credit score.  All consumers are entitled to dispute credit report errors as stated in the FCRA (Fair Credit Reporting Act) and improving your score, even by just a few points, is also a great way to boost your spirits.

Create a repayment plan.  Creating a repayment plan can be a daunting task and if you’re not sure about where to start, calculate your total debt and compare it with your monthly income.  If you’ve run up a pile of debt, you might need to work on repayment for a few months to a year, depending on your financial capability.

Do you think it will be possible to target a 3-month or a 6-month repayment period?  If you need a much longer time, don’t worry.  As long as you begin working on repayment today, you will be able to cut down your debts within the next three or six months.  So do the math and see what percentage of your income you can dedicate to debt repayment, while the rest goes to personal expenses and monthly utilities.

Prioritize your debts.  Which of your accounts have the highest interest rate?  It will be great if you can make a full payment to this account to stop your debt from further accumulating.  You can also consolidate your debts by acquiring a debt consolidation loan.  This way, you only need to deal with one creditor and pay a single interest rate.  For credit card debt, you may consider transferring your balances to a credit card with zero balance transfer rate.

Avoid new charges.  Debt repayment should be your main focus until you’re able to accomplish this goal. As you work on paying off your debts from the previous year, do your best to avoid incurring new charges.

Firstly, unsecured bad credit credit cards will help you recover from your financial problems by giving you a credit line. The credit card can be used to purchase any product or service without the need to pay in cash. A grace period is provided so the card holder has the chance to pay back the amount without interest.

Secondly, unsecured credit cards for bad credit can be used as tools for improving your credit score. Given that you use your credit card appropriately, you will be able to gradually improve your credit score through continuous use of the credit card. If this is something that you want to happen fast, you must strictly pay for your monthly bills in a timely manner and never spend over your credit limit as it can slow down the process of improving your credit score.

Unlike secured credit cards, unsecured credit cards do not require the submission of a security deposit.  Even with bad credit or no credit history, a person can qualify for an unsecured bad credit credit card.  However, there is usually a set-up fee required to open the account.  Furthermore, the interest rate and finance charges are expected to be much higher than secured credit cards and regular credit cards.

Overall, Unsecured bad credit credit card can be a great assistance particularly to individuals with bad credit score. Regardless of the reason why their credit score has deteriorated, as long as they are willing to make the necessary efforts to improve it and maintain it, unsecured credit cards for bad credit can help them recover, rebuild their credit score and enjoy the benefits that it has to offer. And since applying for credit cards for bad credit is very easy, there is no reason for you not to consider it and start benefiting with the services it has to offer.

Secured and Unsecured Bad Credit Cards

Fortunately, credit card issuers today have opened up their doors to the bad credit market.  In fact, there are a number of credit cards for bad credit that you can choose from, depending on your needs.  Generally, you can apply for a secured credit card or an unsecured credit card for bad credit.  What’s the difference between these two bad credit credit cards?

The secured credit card is the more popular choice as it has been used for repairing bad credit for a long time.  This type of card requires a security cash deposit which can range from $200 to $500 or more, depending on the desired credit limit.  If you need a higher credit line, you are expected to match that amount with your deposit.  On the other hand, some issuers offer a credit line slightly higher or a bit lower than the amount of security deposited.

What about an unsecured bad credit credit card?  This a fairly new type of credit card for bad credit.  Unlike a secured card, it does not require cash deposit.  Nevertheless, the interest rate is expected to be much higher than a secured card considering the greater risk involved in extending this account.  In addition, there are additional fees to keep the account active as well as transaction charges.

Prepaid Debit Cards for Bad Credit

There is another kind of bad credit credit card which can also be used for rebuilding bad credit.  These credit cards are known as prepaid debit cards.  Although not your regular credit card, a prepaid debit card can now be used to repair bad credit as long as the issuer offer credit reporting service to a major credit bureau.

A prepaid debit card does not come with a credit line.  Instead, the card holder is required to submit a deposit upon opening the account.  The amount of deposit will be spent as the card holder uses the card for payment.  When the balance runs out, the card holder must make a new deposit to be able to use the credit card for new transactions.

A prepaid debit card does not come with interest rate since payments are automatically paid using the funds in the debit account.  However, there is a fee for every transaction or each time the card is used for payment.  Annual fee and penalty fees are to be expected as well.

Use Your Bad Credit Credit Card to Rebuild  Bad Credit

Regardless of the type of bad credit credit card you choose, you can use it to improve bad credit or a low credit score.  The key is to use the card regularly for payments, making sure that you can submit your payments on time.  Remember, you need to show that you are capable of managing debt and credit through the use of your credit card.

Usually, most people would rely on different financial aids to help them survive these situations. But how about for individuals that don’t have enough credit scores to qualify for these financial aids? This is where unsecured bad credit credit card becomes a great help especially for those with bad credit history.

Unsecured Credit Cards for Bad Credit

Unsecured credit cards for bad credit works just like most credit cards. It can be used to purchase products and services, can be used online, and at regular shops as well. The only difference is that credit cards for bad credit are made especially to help individuals with bad credit with their financial needs. Since it gives credit to people with low credit score, it is just fair for credit companies to charge higher interest rate and different repayment terms compared to regular credit card. But other than that, it’s as good as any regular credit card.

Applying for Unsecured Bad Credit Credit Card

Applying for unsecured credit cards is very easy. Most credit companies now have online websites where interested applicants can easily send their online applications anytime. The application will only require personal information and upon submission, the applicant can expect to receive a call or an email verifying the request. Depending on the credit company, it usually takes 24 hours or a few days to know whether the application has been approved. Once approved, the applicant will receive the actual credit card through post mail in four to five banking days.

Proper Use of Unsecured Credit Cards for Bad Credit

To be able to fully enjoy the good use of unsecured credit cards for bad credit, it is absolutely important for the card holder to use it properly. Using it appropriately includes paying the monthly bill in full, paying on timely manner, and staying within the allotted credit limit to avoid penalty fees and to improve a bad credit score. Benefits of Unsecured Credit Cards for Bad Credit

Once the credit card is received, the card holder can instantly use it for payment. As long as the card holder accomplishes the monthly payment obligations, he/she can enjoy numerous advantages that unsecured credit cards for bad credit offers.

Among its great benefits is being able to improve their credit score, and possibly be granted an upgrade to a regular credit card.

Unlike a secured credit card, an unsecured bad credit credit card does not require the submission of cash deposit.  Nevertheless, the credit limit may start out low.  Most issuers offer a credit limit of $300 or less for a customer with bad credit history.  However, you can use an unsecured bad credit credit card as a tool for rebuilding credit  As your credit score improves, you can request for a higher credit line from your issuer as well.

How about the interest rates and fees?  The interest rate is bound to be much higher for an unsecured credit card especially if you have bad credit.  Since you will not be submitting a cash security deposit, the risk of default is greater.  Hence, the issuer may also impose higher fees to make up for the risk.

Can you count on guaranteed approval despite your present credit standing?  You can find guaranteed approval bad credit credit cards in the market.  For example, the Horizon Gold Credit Card is especially designed for customers with bad credit and offers guaranteed approval.  There is no application fee and the credit card reports to a major credit bureau so it can be used to rebuild bad credit.

Another type of guaranteed approval bad credit credit card is the Orchard Bank Classic Mastercard.  This unsecured credit card for bad credit reports to all three major credit bureaus which makes an ideal tool for credit repair.  Email and text message are also sent to ensure that you will not miss or forget your due date of payment.  Remember that timely payment is a key to improving a low credit score since 30% of the FICO score is based on payment history.

There is also the Visa Gold Card from Applied Bank which offer $500 credit line with no deposit required.  It offer credit reporting provision, 24.7 online account services and with no application or processing fees.

Indeed, you have a number of choices to choose from if you want an unsecured credit card for bad credit.  Take the time to compare and choose the credit card that best matches your lifestyle and needs.  The most important thing is to ensure credit reporting to a major credit bureau so you can improve your credit one step at a time.

Using an unsecured credit card for bad credit, you may need to work on improvement for at least 6 months or longer, depending on how bad the damage is.  As you improve your credit score, take the initiative to request your issuer if you can enjoy a higher credit limit, a lower interest rate, and reduced charges.

Unsecured credit cards for bad credit are just like regular credit cards. It can be used to for payment at any establishment that accepts credit card payments, online transactions, automatic payments and other basic service that credit cards offer.

The differences that unsecured bad credit credit cards have over regular credit cards are interest rate, repayment terms, and basis of how the credit company determines the applicant’s credit limit. Since the person applying for this type of credit card has bad credit, fees and charges would be different. The credit limit will be determined based on the applicant’s credit score.

Other than being a useful financial aid for a person with bad credit, an unsecured bad credit credit card can also be beneficial in many ways. For instance, this card can be a tool to improve the credit standing of the card holder effectively. Most credit companies report to the major credit bureaus which is responsible for determining the creditworthiness of every person.

Another benefit is the security and safety it provides to its cardholders. Cardholders are required to present an I.D. before every transaction and will receive a statement of accounts every month. Depending on the credit company, cardholders usually have the option to place a picture of themselves in the credit card itself to ensure a safer transaction.

However, a card holder must use his unsecured credit card for bad credit properly to fully enjoy all the benefits it has to offer. The card holder is responsible in making sure that credit purchases do not go over limit to avoid incurring additional fees. It is also important to submit monthly payments in a timely manner to avoid late penalty charges.

Card holders is also advised to check monthly statement of accounts regularly to make sure that all charges are accurate.  In case errors occur, it would be easier to dispute incorrect charges if you can inform your issuer immediately.

Applying for unsecured credit cards for bad credit is very easy. The applicant only needs to send an online application to the official website of their chosen credit card company. Since most credit companies offer instant services, the applicant can expect a call or an email notification that verifies the applicant’s credit card request. Within four to five banking days after approval, the applicant will be able to receive the unsecured bad credit credit card by mail.

Unsecured bad credit credit cards are one of the most common financial assistance that individuals with bad credit consider to help them recover from bad financial situation. However, simply using unsecured bad credit cards for bad credit won’t make it happen.  A person must take specific actions to effectively recuperate from bad credit.

If you are thinking of applying for this type of credit card to rebuild your credit at the soonest time possible, take note of the following tips:

1. Pay your credit bills on time

Rebuilding your credit score through unsecured bad credit cards requires you to prove to your credit company that you are a responsible payer and the best way to do this is to pay for your credit bills on or before its due date. If you are not good with remembering dates, it’s good to note it on your calendar every month or pay for it as soon as you receive your monthly compensation.

2. Minimize your credit purchases

Credit companies review your credit transactions regularly. If you minimize your transaction to at least 30% of your credit limit, paying your charges in full will be much easier.  More importantly, minimal use of your credit line is a great way to raise your credit score since credit utilization makes up 30% of your total score. If you can do this continuously, you will see good improvements to your credit scores after a few months.

3. Pay your bills in full amount

If you can keep your credit purchases minimally, then paying your bill in full should not be a problem. If it is not easy for you to minimize your spending, it’s best to avoid going to places where you can be tempted or don’t bring your credit card with you when visiting those places.

4. Always check your statement of account every month

It is very important that you take the time to check your statement of account every month. There are instances when unknown transactions are credited to your account because of mistaken identity or fraud, which is why it is vital that you check your statement of account to correct any mistakes.

5. Take note of your annual fees and other bills

Unsecured bad credit cards for bad credit come with different fees that must be paid on time. If you are on a tight budget, it is advised that you save for repayment so you can pay for them on time and avoid any late payment charges or any other fees.

If you keep these 5 tips in mind as you use your unsecured bad credit cards, you will surely be able to improve your credit score, recover from a bad financial situation and enjoy the benefits of your unsecured credit card.