July 12, 2024
Your credit score can be a tough number — tough to earn and tougher to maintain. You work and work, but expenses never stop. Anything unanticipated can rapidly deplete an emergency fund and wreck a budget.
If your score has been suffering from this downward drift, don’t despair or give up. Yes, you will have to pay off any debt that you’ve incurred, but some repayment paths are easier to follow and more productive than others. A few helpful financial tools — often referred to as special accounts — can help you develop a strategy that can repair your finances and ultimately rebuild your credit.
Progress Via Credit Union Partnership
Unlike your typical bank, credit unions help you not only manage your finances but also, if needed, repair your finances, too. For example, when you become a member of La Capitol Federal Credit Union, you can reap similar benefits by accessing financial tools designed to address your specific credit challenges. Here are three effective options that can help you get started:
1. Get a Stable Checking Account
You need to be “banked.” The Federal Reserve actually looks at the types of financial services people use and whether they are banked. When you are considered banked, that indicates that you have a bank—or credit union—account and do not have to use alternative financial services like money orders, check cashing services, payday or auto title loans, or tax refund advances to pay for goods and services.
Individuals without a bank or credit union account are described as unbanked. Somewhere in the middle are underbanked individuals—people who have a bank or credit union account but also use some alternative financial services from time to time.
Having a stable checking account ensures that your money is safe and insured yet lets you conduct the everyday transactions essential to daily living—things like depositing paychecks and paying bills. Plus, you can do them without the excessive fees often associated with alternative financial services. Typically, a checking account also comes with online access that allows you to manage transactions at any time from any device.
Opportunity Checking is La Capitol’s simplest option. You can access your account—and your money—any time you need to. The account comes with a debit card, and you can make free withdrawals at any La Cap ATM. You can open an Opportunity Checking account with as little as $25, and the monthly service fee is under $10–a low $8. The only real requirement is that you arrange for direct deposit into the account within 30 days of opening the account and sustain it for the life of the account.
2. Open a Savings Account
Before you skip this option because you don’t have any savings to put into a savings account, stick with us for a bit. We’re here to tell you that even if you haven’t been able to save up, you can still have a savings account! It might carry a slightly different name, but it’s a savings type of financial tool or asset that really might help you start a savings habit.
Having an account devoted to savings gives you a place to start saving. It can be the beginning of an emergency fund or a place to save up for those tires you know you’re going to have to buy before year’s end. Maybe, you want to save up for Christmas, a new sofa or a cross country move. In any case, having a separate account where you can keep money separate from checking is a sound way of making sure funds are saved, not accidentally spent. Plus, money in savings may even earn a bit of interest.
Regular Savings is the primary savings account every member of La Capitol gets upon joining. Regular Share goes hand in hand with many of the services you’ll enjoy as a member and it includes a share that gives you a voice in La Cap’s future.
Future Share Loans are a type of savings account we offer at La Capitol to help individuals who struggle to save. Just as important, future share loans do double duty as a loan that can contribute positively to your credit report. Simply put, it’s a way of saving that holds you accountable.
Just determine the amount you want to save. La Capitol will generate a payment schedule that will allow you to meet your goal. Then, all you have to do is make timely monthly payments that can be reported to the credit bureaus. Your funds accumulate untouched until the loan is paid in full. At the end of the term, your funds are yours. You can spend them or use them to open an interest-yielding savings account.
When you open your loan account, you can borrow and save as little as $200 or as much as $1,500. Payments can be as low as $50 a month, and if you want to pay more than your minimum payment or pay the loan off, there’s no prepayment penalty. The whole process is devoted to helping you save.
3. Secure a Major Credit Card
Credit scores are largely based on how well people repay what they’ve borrowed. Borrowing comes in two forms—secured credit and unsecured credit. Home loans, for example, and car loans are common types of secured loans because the home or car stands for collateral if you default on the loan.
With no collateral, unsecured debt often takes the form of revolving credit, with a variable interest rate tacked onto any unpaid balances. Typically, interest rates on unsecured credit are considerably higher than the rates on secured credit. This is what gets people in a bind when they are unable to pay off monthly balances in full.
Regardless, having access to a credit card is the last step in repairing credit. A major credit card can give you that little bit of financial leeway you need when the cash flow in your checking account can’t quite handle a needed expense—and you don’t want to start nickel-and-diming your savings.
Plus, simply having and using a credit card in a controlled manner can give a credit score a boost. Credit bureaus look favorably on individuals who pay their monthly balances in full and keep their credit utilization ratio—the amount of debt versus their credit limit—under 30 percent.
If all of this sounds nice but is not an option right now, you may want to consider a secured credit card like La Cap’s Share Secured Visa Credit Card. This card lets you have a major credit card that you can use to both pay for things and rebuild your credit. Simply put a set amount of funds on deposit as collateral to secure the card, and use the card responsibly. You can deposit as little as $500 or as much as $15,000. The amount you deposit will determine your spending credit limit.
You can use the card just like you would an unsecured credit card. No one else will know if it’s secured or unsecured. Then, each month, you’ll receive a bill. If you pay off the balance in full, no interest will accrue. If you can’t pay off monthly balances in full, interest will accrue at a variable rate just like a regular unsecured credit card.
The card has no annual fee for the first year. By keeping balances within budget and making payments on time, your responsible use of a secured card may even help you access an unsecured one with larger buying power.
Achieve Financial Wellness with La Capitol
Learning how to manage finances well can take years and many mistakes, and that’s exactly what makes a good credit score such a valuable commodity. If you’d like to learn more about how to repair your finances, La Capitol Federal Credit Union is ready to work with you.
Open an Opportunity Checking Account, save with a Future Share Loan, or apply for a Share Secured Visa Credit Card, and start rebuilding your credit today with us!