Getting Your Credit Back on Track:
In the aftermath of the recession several years ago, many people had their credit destroyed by the loss of employment and/or foreclosure. Some have had to declare bankruptcy. Although bankruptcies and foreclosures can remain on credit reports for seven to ten years, it is possible to rebuild your credit history.
The first tip, however, is to make sure the credit bureaus remove any foreclosures or bankruptcies after the 7 to 10 years have expired. Often times they may leave these negatives on your report unless you request they be removed.
Rebuild Your Credit with Secured Credit Cards:
Not having a credit card can be a hardship for many people, but it may be impossible to get a credit card even with poor credit scores. A secured credit card is a card backed by money deposited into a savings account with the issuer. This type of credit card is available to virtually everyone and can help rebuild your credit quickly and easily.
Most issuers will open a secured credit card account for as little as a $300 deposit. Consumers can rebuild their credit by paying the balance off each month.. or by at least paying more than the minimum payment due.
Rebuild Your Credit with Secured Loans:
Playing musical lenders with as little as $1000 is a great way to establish or rebuild credit. Deposit $1000 with a bank and take out a $1000 loan secured by your savings deposit. Deposit this money into a savings account with a second bank.
After about a week.. take out a $1000 secured loan at the second bank against your savings deposit. Deposit this money into a savings account in a third bank.
Do not spend the money you have on deposit at the third bank! You may need this money in case you have a bad month and run into trouble making the payments on your loans with the other two banks.
Make timely payments on both of the loans at the first two banks for a minimum of six months before paying them off. Do not pay them off in less than six months, since it takes at least this long to establish a responsible payment history.
After making on-time payments for 6 to 8 months.. go ahead and pay off the first loan using the money you have on deposit with that bank. A couple of months later pay off the loan you have with the second bank, using the money you have on deposit with that bank.
That leaves you with $1000 in your account at the third bank, which is the original $1000 you started with. This process can be repeated with different banks once the original loans are paid off.
Get Extra Credit for Additional Payments:
Instead of paying mortgage and car loan payments monthly, make payments every four weeks which adds up to 13 payments per year instead of 12. Not only will loans be paid faster costing less in interest, it will also improve your credit scores.
On secured loans, making payments every two weeks instead of every month is also a way to save on interest and rebuild credit scores, provided the loan is not paid off in less than six months. Early repayment of loans helps raise credit scores quickly.
Loans for People with Less Than Perfect Credit:
There are retailers who offer credit, often without credit checks, for the purchase of furniture, appliances or electronics. Often these retailers are rent-to-own businesses who do their own financing.
While prices and interest rates may be higher than those of other stores and conventional lenders, many of these establishments do report to credit bureaus and will thus help in re-establishing your credit.
Check List for Rebuilding Credit:
Before taking out any type of loan or secured credit card, make sure the lender is one who reports payments to the major credit bureaus or it will not count toward establishing or rebuilding your credit. And, never borrow more than you can comfortably afford to repay since this will only damage your credit further.
Keep all payments, including rent and utility bills, up to date to avoid negative items on your credit reports. Whenever possible, pay off loans early, but not in less than six months’ time to see the best results on your credit reports.
It is impossible to rebuild credit overnight and it may take up to one to two years to re-establish a good solid credit rating. Reviewing your credit reports from major credit bureaus on an annual basis can help consumers find and correct errors on their reports.
Meanwhile, if a consumer is turned down for a loan, he or she has the right to know the reason.. so if a loan is declined, be sure to ask the lender why.
In rebuilding credit it is important to understand how credit works and to make sure you always live within your means.