SIX STEPS TO RE-ESTABLISHING YOUR CREDIT
Your FICO score influences not only whether you can obtain a loan or purchase good and services on credit, it may also effect employment, living accommodations, or your ability to obtain insurance.
The effects of having poor credit history are many. It will take time for you to regain your credibility with credit grantors. You must be able to show that in spite of previous debt problems, you can now handle credit in a financially responsible manner. To assist in this process, here are six steps you can follow:
1. Develop a liquidation plan to repay your debts. Determine how much you can repay each month until you have paid off what you owe. Then pay your bills on time. Lenders generally will look more favorably on individuals who have solved debt problems than those who ignore them. It will help to restore your credit if you can bring your debt balance to zero. Visit the Motley Fool to learn '9 ways to pay off debt'.
2. Design a plan to manage your money. Often people develop financial problems because they overuse their credit. To reduce the likelihood that you will find yourself in a credit crunch again, make sure that your budget is well within your means.
3. Pay with cash. Even if you have some credit available, you are more likely to change your spending habits by not using it. When you pay with cash or even a check, it forces you to recognize that the money you can spend is limited to the amounts of funds you have in your checking account. This forces you to make decisions about what you can afford to buy.
4. Obtain your credit report. After you have been
denied credit because of negative information, you may obtain a free
copy of your credit report from the bureau that supplied the
information. You have 60 days to make this request. As a rule of
thumb, it is wise to
copy of your credit report once a year. Doing so will allow you
to pinpoint any outdated and/or erroneous information. If this is
the case, you will need to familiarize yourself with
how to correct
erroneous and negative information as well as
writing a dispute letter.
If you have a savings account at the bank or credit union, you may be able to a signature loan; that is, borrow a small amount using the savings account as collateral. Learn more about what signature loans are.
Some banks will issue you a secured credit card. Click the link to learn more about getting credit with a secured credit card.
6. Apply for unsecured credit. A local department store may be more likely to issue you a charge card than a national creditor. if you can offer a reasonable explanation for your past credit behavior and show that you are now financially responsible, this information will generally help. Once you obtain a charge card and pay your bills promptly for a reasonable length of time, your credit line will probably be increased.
7. Apply for a small loan. Bad credit unsecured loans for building credit are a great option. These types of bad credit loans are specifically designed to help get you the cash you necessitate will improving your credit rating by reporting your payment activity to all three major credit bureaus.
8. Manage your debt. Take care of your finances by managing debt wisely.