There she goes again. Your co-worker has told everyone that she just closed on her new condo. It was six months ago that she drove up in a brand new SUV. You wish that your credit could be as good as hers.
Guess what? Your credit can be as good as your friend, in fact she may have been in your shoes two years ago. Many consumers with bad credit believe that they need to resort to gimmicks in order to re-establish their credit. For example, forming a corporation, or obtaining a fake social security number, both of which is unrealistic and illegal respectively. Gimmicks are not necessary to have good credit. All it takes is knowledge of the consumer laws, commitment, and persistence.
Having a good credit score saves you thousands of dollars in interest payments by qualifying for the lowest interest rate available. Having bad credit can cause stress when you are trying to buy a car, home, or just to rent an apartment. I decided to get my financial house in order and stop paying high rates of interest because of my low credit score. Eagerly, I spent a large amount of time studying the consumer laws, reviewing my credit reports, and analyzing all the information on my credit† report. I did not assume that all the information on my credit report was correct. I discovered by reading all the laws in the Fair Credit Reporting Act that some of the information in my credit file was indeed inaccurate. After cleaning up my credit file and increasing my score by 100 points, I started consulting family and friends. My husband, who is an auto sales consultant, started referring customers to me who had trouble purchasing a car because of their low credit score.†
Disheartened by a Freddie Mac study that found that 48% of African Americans have bad credit, it inspired my husband and me to start Crystallized Credit Resolution Services, and to publish a Do-It -Yourself Credit Repair Kit. Our primary mission is to help our clients increase their credit score so that they will qualify for the lowest possible interest rate when purchasing appliances, automobiles and homes. Here are some steps you can take to bounce back from bad credit:†††
1. Start paying your bills on time.† This is always a good practice, and is especially critical that you make prompt payments close to the time you need a loan. That's because a late payment missed in the last few months is likely to lower your score much more than an isolated late payment five years ago.
2. Correct mistakes. Review your reports from all three credit bureaus for accuracy several months before applying for a loan. The Crystallized Do-It- Yourself Credit Repair Kit will aid you in your disputes it has a dozen sample letters to choose from.† It also provides you with some of the factors that are considered in your FICO score.
3. Reduce your credit card balances.† Generally its good to keep your balances at or below 30 percent of you credit limits. This is a weighted heavily in your FICO score. We call it the one-third rule.
4. Use a budget. It helps you plan where you will spend your money and how you will save some of it. Also having a budget will help you get ready to buy a home. When you are applying for a mortgage loan, the lender will ask you how much income you have and what your expenses are. In other words, they will calculate your income-to-debt ratio. ††
5. Obtain new credit. Having at least one or two revolving account will increase your credit score if it is used correctly. Revolving accounts consist of major credit cards (Visa, Master Card), department store cards (JC Pennyís, Sears), or a jewelry account card.† Itís important to understand that it will not be easy to get these credit cards, you will likely have to start with a secured credit card by submitting a minimum deposit. Make sure you pick the card that has the lowest interest rates. With a jewelry account you will have to put down some cash, however, this will get the ball rolling in rebuilding your credit.† If your credit score is below 600 you are not likely to be approve for a department store credit card, this will only result in an inquiry which will decrease your credit score by two points; therefore, inquiries should be kept to a minimum of two per year.†
6. How to use your credit cards. You need to think of your credit cards as a convenience and not as an extension of your spending capabilities. You should definitely use your credit cards, but be certain to pay the entire balance off each month, or pay more than the minimum. In addition, do not max out your credit cards. Remember you are using the credit card to rebuild your credit not to destroy your credit further. When you use your credit card to purchase a shirt ask yourself, is this shirt worth the interest I will have to pay later?
7. Open a Bank Account. To develop good credit, itís important to have a stable bank account. You should have a checking and savings. Believe it or not you do get more points for having both. Maintaining bank accounts will demonstrate to creditors that you are able to manage money. This means prevent over drafts.
Remember you did not get into this mess overnight, so it will take time to
clean it up. Having patience and the information just given to you will put
you on the right path. If you have negative marks on your credit report that
you can not eliminate, don't worry in a few years it will not be as important
as the new credit history you will soon be creating.†
To request a credit consultation, order a copy of our Do-It- Yourself Credit Repair Kit, Email Crystal Cornell at firstname.lastname@example.org.
This article used by permission.
© 2003 BlackandChristian.com. This article used by permission.