By Clare Kaufman
Seven Ways to Turn Around Bad Credit
Mortgage Credit Problems Columnist
Today is the first day of the rest of your credit history. What are you going to do? There's no better way to restore your good name than by proving that you can manage your finances. A bad credit loan or mortgage can help you revitalize your credit.
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- The Home Affordable Refinance Program (HARP) has been announced by President Obama, saving homeowners thousands over the lifetime of their mortgage
- Eligible homeowners may be able to refinance, regardless of how much they owe on their home
Bad credit lenders are in the business of giving borrowers a second chance. If you have the means to take on monthly payments, you can turn around your bad credit history. Here are seven ways to make the most of a new loan opportunity:
- Pay your bills on time. Payment history accounts for about 35% of your credit score. Automatic funds transfer can make sure each payment arrives on time.
- Repay loans in installments. Bite off your repayment piece by piece, and you'll do more to prove your financial responsibility than by paying off the loan in several large chunks or a single lump sum.
- Catch up on missed payments ASAP. Time is of the essence--your credit score takes into account not only missed payments, but also the length of time the bill remains unpaid.
- Consult a professional counselor. Managing your credit is a lifestyle choice. A financial counselor can help you streamline your budget and devise effective money management strategies.
- Obtain a copy of your credit report. Your credit report lists the top four reasons the score wasn't higher, helping you avoid making the same mistakes in the future.
- Limit new credit accounts. One perfectly-managed bad credit mortgage or other loan can have a much more positive impact than many new credit accounts. Rapid account buildup is a red flag for potential lenders.
- Don't close old accounts. The mistakes of your past won't go away if you close an old account. Even an inactive account can boost your bad credit score by increasing average account age.
It's never too late to make a second impression. A bad credit loan can give you a new lease on life if you manage it right. Follow these seven steps, and good credit is right around the corner.
"Understanding Your Credit Score," myFICO.com