From Bad To Good Credit: Re-establishing Your Credit History
By MortgageCreditProblems.com ColumnistMortgage Credit Problems Columnist
If you've stumbled financially and fallen into debt problems, re-establishing credit is an important step in getting back on your feet. Lenders look at a variety of factors to determine whether you're worth lending to. So you need to prove yourself with an established credit history.
Here are five beginning steps to re-establish credit:
• Open checking and savings accounts. Even though these don't necessarily appear on your credit report, lenders will ask if you have them, and your case will look better if you do.
• Think credit variety. Maintaining different types of credit accounts, such as a credit card, which is a revolving credit account, and a personal loan, such as a fixed-payment car loan, bodes well for your credit score, so open different types of credit accounts. But don't go overboard. Opening too many accounts at once might make you look desperate, so open only the number of accounts you need and can use them responsibly.
• Bad credit? Get security. If financial institutions are reluctant to give you a credit card, then get a secured credit card account. These credit card accounts are secured by deposits. You deposit a certain amount in the financial institution issuing the secured card, and the deposit acts as collateral. Make sure that your payments on the card will be reported to credit bureaus, which will help improve your credit score. Once you've shown you an handle the card responsibly, the financial institution often will offer you an unsecured credit card. Keep in mind secured cards often have higher interest rates and fees, but they're worth it if this is one of the only credit options you have. The interest rate is immaterial if you use the card sparingly and pay it in full each month.
• Get a credit co-signer. Consider getting someone to co-sign on a loan if you can't get one yourself. You'll still be responsible for paying the loan, but the co-signer will get statements and the lender will approach the co-signer for money if you default. A co-signed loan will give you the credit you need, such as a home loan, and allow you to build credit history. Remember that if you pay late it will show up on your co-signer's credit, so if you go this route, take your payment responsibility very seriously--automatic payment is probably a good idea.
• Maintain your oldest credit card accounts. Maintaining credit card accounts for a long time will help your credit score, so if you have to close accounts, start with the least established ones. Keep in mind, too, that closing a bunch of delinquent accounts won't improve your credit score--those account histories will still appear on your credit report.
There are no shortcuts--even services that promise to "repair" your credit achieve temporary improvements at best and can be expensive--your money would be better spent paying your bills.
About the Author
Share This Article:
 del.icio.us |
| |  Digg |
| |  Reddit |
| | 
|
| | | |
Other Recommended Credit Repair Articles
