Rebuilding your credit is a very important step in our credit improvement process. One is example is if you have many derog things on your credit and little to no positive trade lines, then you will not have any credit once the derog items are removed from your credit. Therefore, it is important that you do as we advise in order to create a balanced credit report in order to have the best possible credit available.
Once we’ve cleaned up your credit, you are ready to start building a positive credit profile. Follow all of these techniques to stack your report with A-1 listings. But be prudent. If you stack too many open accounts, you may be denied new credit based on your debt-to-income ratio; if you show excessive credit inquiries, you may be denied for that.
Piggy-back on a Friend
If you know someone (a good friend or parent) who has good credit, you can “borrow” their good credit listings. This friend must have credit cards and must trust you enough to allow you to become an “authorized user” on his card. Have your friend call his credit card company and request that you be placed on his card as an authorized user. A copy of the card will be sent to you but you never have to use it (you can simply return it to your friend). Your credit file will should soon show an open account with all of the positive history that your friend has created over the years from that credit card. A small footnote will show that you are an authorized user of that card. Remember, though, when a new credit grantor reviews your file, he may insist that the balance on the card appear on your debt-to-income ratio balance sheet. That shouldn’t disqualify you for credit if your income is sufficient and you don’t have an excess of debt on your file.
Get a Secured Credit Card
What is a secure credit card? Don’t mistake a secure credit card from a pre-paid credit card. A secure credit card DOES get reported on your credit. The way a secure credit card is that you go to a bank, say Bank of America, which offers you to open a secure credit card for as low as $300. You tell the bank representative that you want to open a secure credit card. They will advise you that you have to open a savings account or CD with at least a $300 deposit. Once you have done so, they will issue you a credit card. When you use the credit card, it does NOT come out of the $300 you gave them. You will receive a bill in the mail each month with the charges that you placed on the card.
The best thing to do is pay the bill off and only use the card once every two months to buy a soda or something. This just to keep the card activated. After you have used the card responsibly for a certain amount of time, the bank will unsecure the credit card, meaning that you can withdrawal the funds that were once frozen to secure the credit card in the first place.
At NO time should you close the credit card. If you do not like the interest rate, only use the card once every two to three months as we said to keep the card activated. If you close the credit card account, you are stopping the credit history of that account, which is not good. If you go back to “What is Credit”, you will see that the length of time your credit history existed accounts for 15% of your score. This includes the amount of time each account has been opened.
If you have a bankruptcy, most banks will not give you a secure credit card. Click here to get a secure credit card even with a bankruptcy on your credit. There is NO credit check. Yes, the interest rate is high, 19.5%, but at least with this card, you balance will not be almost to the credit limit like a lot of other rebuilding or just starting credit cards out there. (See video in “When Looking for a Credit Card)
Seek Easy Credit
Finding a credit union should be your first action in seeking easy credit. Credit unions are very forgiving on those who have less than perfect credit.
In addition, Many stores extend credit without tremendous regard for the credit standing of the applicant. These stores usually can be found in industries with small products or traditionally high mark-ups. Here are a list of creditors who will often extend credit to those without much credit history:
Keep the Accounts Active
Once you’ve successfully received new lines of credit, it is important to have some activity going on each month. We don’t suggest you pile up large debt– maybe $50 dollars or so in a balance. And pay it on time. This is what future loan officers and other creditors want to see. (Inactive accounts with a zero balance aren’t displaying a tendency to handle existing debts.)
You need to display at least one year of positive credit habits to be taken seriously, especially by a mortgage company. Start now or you will always be a year or two from a good credit standing.
Please refer to the info page to determine if you are in this category. Remember when applying for a Credit Card it is important to review all the details before applying. Please refer to “Credit Cards” under the “Credit Info” tab on this site.
