The importance of re-establishing your credit
So you screwed up somehow and are looking for ways to re-establish good credit. You can do it but it takes time – sometimes over 18 months and you have to work hard. You need to prove that you become a financially sane person and get a lot of positive things on your credit report. It is a slow and painful process to re-establish your credit and you have to be persistent.
THINGS TO DO:
- pay off your debts – start with bankruptcy, liens or judgements against you, that is anything that is under public records section of your credit report
- become cheap – the best way manage your money and start re-establishing your credit is to save as much as you can
- pay with cash – if you still have credit cards, pay off outstanding balances and close all but one or maximum two
- order a credit report – check it over carefully to see what kind of information it contains – if you believe there is an error, write the credit bureau and fill out a dispute form with each agency:
TransUnion –
www.creditprofile.transunion.ca/learningCentre/disputing/overview.jsp
www.creditprofile.transunion.ca/learningCentre/disputing/overview.jsp
Equifax – www.econsumer.equifax.ca
- establish a savings account so it serves as evidence that you can handle money and if necessary, use as collateral
- establish a personal contact with the branch manager or loan officer of the bank where you keep your account
- contact creditors whose accounts you have paid off earlier to help you re-establish some credit – they may consider it and will look at how regular your payments were before problems arose and how long it took to resolve those problems
- if you have to, ask someone who still believes in you, to cosign for you – make sure this unfortunate person reads about cosigning loan first
- get secured credit card – it is an excellent way for someone with bad credit to quickly re-establish a good rating
- apply for a retail card offered by gas stations, appliance and furniture stores – Shell, Mobil, Best Buy, Wicks Furniture and the likes are usually easy going and may extend you a credit even if you have credit problems – if denied, try to purchase an item on a layaway plan, the store will be more inclined to provide you with a charge card if you prove reliable
- pay your bills on time – that is needless to say and explain, the most vital part when someone tries to re-establish credit
- you have a right to place a 100 word statement (50 recommended) on the credit bureau file, to be given to anyone who obtains a future report.
If credit is denied – do the following …
- ask the creditor to provide a written explanation why you were turned down
- check with the credit-reporting agency listed as the source of the adverse information to see if it is accurate
- do not apply for credit elsewhere until the reason for the denial has been established and resolved
- beware the creditor looks at length of time on the job, length of time at one address, and the percentage of income owed out of “take home” pay excluding housing cost – this should not exceed 20% excluding mortgage and car payments for most folks.
FAQs
Secured Credit Card – What is a secured credit card?
A secured credit card is a guaranteed VISA or MasterCard and is secured by a deposit to the issuer’s bank. It works simply as a credit line that you fund for yourself with your own cash. To get a secured credit card you have to deposit on the issuer’s bank account an amount ranging from $250 to $3,000. Then this bank will send you a credit card. Their rules differ but usually you can use your credit card up to 100% of your deposit.
Secured credit cards are sometimes the only way for individuals to more or less quickly establish or repair their credit. The acceptance is practically guaranteed, after all you are putting your money where your mouth is and don’t fret, there are some fees that secured credit card issuers will charge you. Unless there is something truly disgusting on you credit report.
Establish credit with secured credit card
College students, foreign students, immigrants, ex-convicts, recently divorced or widowed and those perpetual “I have paid cash for everything since I turned 15 …” may find secured credit card very useful, if they are rejected by banks due to lack of credit or insufficient credit. If you use your secured credit card for a year or two, you will establish a nice ground to apply for far more credit.
Fix credit with secured credit card
If your credit is bad, than secured credit card is a solution for you. Whatever made your credit bad, late payments, collections, medical bills, credit counselling or bankruptcy, a secured credit card will help you to get fresh start. Again, using it for a couple years will restore some credit and help obtain more on much better terms.
How long must I stay secured?
The trick is to pay your secured credit card bills on time. We can’t emphasize this enough. You must demonstrate your newly acquired ability to manage the secured credit card for at least a year. If you do, you will be able to ask for an increase on your credit line or apply for a regular credit card.
What about credit limit?
Most banks that issue secured credit cards require you to make a deposit for, let’s say $500, and that will be your credit limit. Some, however, may offer much better deal that don’t require a dollar for dollar match to open the account.
Where can I use my secured credit card?
Your secured card will look no different than a regular credit card. You can use your secured credit card to buy groceries and gas, book hotels, buy airline tickets, etc.
Review the credit card terms with magnifying glass
When considering a secured credit card, you should closely review the terms. They tend to have annual membership fees, high annual percentage rates, and lame credit limit increases. If you miss payments or are late on payments or exceed your limit, you will have to pay significant penalties.
All in all …
Make your secured credit card payments on time. After all, it is relatively easy to get one so put it to a good use and don’t ruin what can be your best and last chance to correct your credit.
If you’re using your secured card to establish credit for the first time, you may try to get another card in six months. If you are using it to re-establish credit, it may take up to two years or more before you can apply for unsecured card, depending on how bad your problems were. In certain cases, it can be as little as 6-8 months. Be patient and make sure you take every step possible to build a good credit rating.
If you are experiencing problems with your credits and feel you need a hand to help get you out of the situation, I can be that hand. Feel free to come talk to me and let me help you re-establish your credits so that you can be one step closer to reaching your financial goals!
I look forward to working with you!
I look forward to working with you!