Approved! How to Mend Damaged Credit
Want a low interest loan or credit card, but can’t qualify because of past credit problems? Don’t give up hope: there are many simple and effective credit-rebuilding techniques you can implement now, so you’ll be more attractive to top lenders in the future.
Review Reports: While some of the credit dents may be rightly yours, others may not. Take a look at your credit reports and check for errors. If inaccurate information is being reported, dispute it with the bureaus immediately.
Deal with Damage: If you have debts lingering in a collection agency or judgments that that you haven’t yet dealt with, take care of them ASAP – a paid debt always looks better than an unpaid one. Owe too much money? Suspend charging and aggressively pay down the balances. Repayment plans can get you on the right track quickly.
Seek Security: To build credit you have to use it – and an excellent place to start is a secured credit card. It works by you making a cash deposit at a financial institution, then a credit line based on the deposited sum is granted. Because the deposit is held as collateral, virtually everyone qualifies.
Look Locally: Another option is a local retailer’s credit card. Their criterion is often less rigorous than larger credit issuers. Be sure they report to the major credit bureaus though – if not, you won’t be establishing a credit history.
Cosign Carefully: You may also choose to have someone with a positive credit record cosign an account for you. However, if you fail to pay, he or she is responsible. Make good on your obligation or you could end up harming more than just your credit record.
Take Time: Recent activity matters more than older information, so using credit wisely now is important. Know timelines too: late payments, judgments, and collection accounts will show up for seven years; Chapter 7 bankruptcies will show for ten. Defaulted student loans and child support debt, however, may remain on your report until satisfied.
Do DIY: Credit repair clinics are abundant these days – but like it or not, doing it yourself is usually the best way to go. Many of these businesses don’t do anything you can’t do yourself for free, but charge a bundle. And if they promise to erase accurate but negative credit information, run, don’t walk, away – there is no way to do that legally.
Charge Correctly: Once you have a credit line, use it responsibly to build an attractive credit history. Keep balances low, make timely payments, don’t pursue unnecessary loans or credit cards, and stick with a few good credit instruments of various types.
Does all this require dedication and patience? Well, yes. But with the money you save on a credit card or loan with the lowest interest and best features, the effort is sure to pay off.