|Overcoming Credit Problems
Rebuilding your credit – bouncing back from a checkered credit past
If you have had credit difficulties in the past, don't give up-it is possible to bounce back and rebuild your credit history. The
important thing to remember is that from now on, any new credit you open must be paid on time--every time. You will begin
creating a better credit picture, which potential creditors may use to gauge how serious you are about putting your credit
past behind you.
In fact, being able to repay a variety of new accounts may be the most important goal, so devising a strategy to open and
pay off as many different kinds of new accounts as you can is a better objective than simply incurring new revolving debt--
especially if you are working towards future goals such as a mortgage or other large loan.
Rebuilding your credit can be similar to starting over from scratch, and starting small may be the easiest option. For
example, department store credit cards can be useful, as most such issuers report payment histories to the major credit
It may be best to use the new accounts in moderation, and make payments that are more than the minimum. You can also
pay off the balance in full each month. However, this will work against establishing a new payment history unless you
continue to make new charges each month and pay them off. Plus, you might not want to get in the habit of relying on
credit cards for everyday purchases. Try these tips:
Carry a very small balance and continue making payments (the positive payment history will continue to show up on your
credit report and improve your credit standing).
Avoid carrying a balance that is more than 30% of your credit limit (creditors may view it as excessive debt that you may not
be able to stay current with).
Rebuilding your credit – bouncing back from a checkered credit past: cosigning
A quick way to jump start your credit is to find a person willing to cosign for a small loan or credit card. If you can stay
current on a major credit card account or small auto loan, this will speed up the process of re-establishing good credit on
If you have money set aside, you can open such accounts for the sole purpose of paying them off. Then try to open a new
account on your own. You may have to wait until your new credit history has had a chance to gain momentum, however,
demonstrating that you are not depending on certain credit cards and loans for survival. That's why opening and paying
down accounts may make it a little easier to get more credit.
Without a cosigner, obtaining a major credit card may prove difficult. A good way to get there on your own is by obtaining a
secured card. With a secured card, the advantages are:
The deposit of a set amount of money with the creditor to guarantee your credit limit-therefore, it's impossible to overspend.
Cards are available with VISA, MasterCard and American Express logos, and offer the purchasing power of a major credit
On your credit report, there is no notation to indicate that the card is secured. In other words, to potential creditors it will
look like you've already been granted a major credit card account
However, some issuers don't report to the credit bureaus – make sure that you select a secured card from a creditor that
does. A secured card is an excellent springboard to obtaining unsecured credit. Beware of secured cards that only allow
you to use it for merchandise only, as well as cards that charge a fee to sign up.
With patience and timely repayments, you will likely be able to build a new credit history that creditors will look upon
favorably when making decisions about your ability to handle even more credit.
Next Step: Learn about Savings Accounts that your State might match your deposits! Click Here.