In most cases, getting new credit is the best way to rebuild your credit. Removing any inaccurate negative information on your credit report by writing letters to the three credit reporting bureaus and paying off any past due bills will help raise your credit score. However, to boost your credit score enough for a loan requires you to rebuild your bad credit and that takes time. Before a bank will lend you money, they want you to prove that you can handle credit responsibility.
Be careful when getting new credit. There are many unethical credit card companies who prey on people with bad credit. Do not accept credit cards with high interest rates or extremely high fees. Keep in mind, choosing the wrong credit card may lead you back to damaged credit. Choose a major credit card company with secured credit card options, and always make sure the credit card you choose reports to the three major credit reporting bureaus.
It is imperative to replace your credit damaging habits with new ones. Don’t let yourself live an impulsive lifestyle and get back into a financial hardship. You must resist charging things you can’t afford, resist only making the minimum payments, and resist skipping payments. Being purposeful with your life and adopting money discipline means you stay well below your credit limit and pay all your credit card bills on time and in full.
During this rebuilding period, don’t take on too many credit cards. It can be hard to manage and can hurt more than it can help!
Secured Credit Cards
Secured credit cards are one of the most common ways for high credit risk borrowers to rebuild their credit. Under a secured credit card arrangement a debtor places funds on deposit with a bank or financial institution in exchange for credit. The debtor is able to make purchases from 90%-150% of the amount placed on deposit, depending on individual circumstances. This arrangement gives high credit risk individuals the convenience of a credit card while assuring the lender that a payment will be made from the secured deposit initially made to open the account.
Be very careful when choosing a secured credit card company. Many of the credit card offers out there are scams. Below are several reputable banks offering secured credit cards. When choosing a secured credit card company, be sure to evaluate the fee structure and interest rates. At a minimum, the credit card company must report to one or all credit reporting bureaus. Not all secured credit card companies report to the credit bureaus, so don’t waste your effort on one that does not.
Credit Monitoring Services
As you rebuild your credit you should carefully monitor your credit report and your credit scores. This is a vital part of rebuilding for the future. All lenders will carefully assess your credit report to determine your overall creditworthiness. If any negative items show up on your credit report after the financial hardship is behind you, it will dramatically lengthen the rebuilding process.
Using a credit monitoring service can prevent negative items from occurring incorrectly, while providing you with credit scores on a quarterly basis. Various credit monitoring services are available to consumers for a low monthly fee, and most charge $10-$15 per month for their services. The best credit monitoring companies provide their clients with quarterly credit scores from the three major credit bureaus, along with real-time updates when changes occur to an individual’s credit report. They also have ID theft insurance and a guarantee. Subscribing to credit monitoring services will not negatively impact your credit score. The homeowner referral page has two well-known credit monitoring services to choose from.
