So you've freed your
credit reports of all questionable listings-no more slow to
pay marks, missed payments, or bankruptcies. You're sleeping easier at night,
no longer dreading to sit down to pay your bills, and enjoying your new sense of
wellbeing. What a feeling!
If your objective was simply to get to this point, congratulations! If, perhaps,
your goal was to buy a home, car, or other large purchase item, it's time to re-evaluate
where you are and choose your next financial goal. If you've had a
bankruptcy,
then you will be working toward reestablishing credit. If you have simply
restored your credit history, then you may be looking at readjusting the interest
rates of any loans or lines of credit you took out during your "hard times."
Whatever your situation is, the following are a few tips for
rebuilding your credit
and maintaining your clean credit history.
Form a workable budget. Understanding the flow of your personal
finances, what is going out and what is coming in, will give you a better feel for
why some of your money is slipping through the cracks. With this information,
you can make informed decisions on the best ways to use your hard-earned cash.
Check out your credit report. Order your
credit reports
at least twice a year from all three major credit reporting agencies and look them
over carefully. Verify that the information is correct.
Make sure your bills are paid on time. Many banks now offer
Internet services that automatically transfer money from your checking account to
your creditors at a set time each month. Timely payments look good on a credit
report. Don't overlook the telephone and utility companies-some of them now
report late payments to the credit bureaus.
Reestablish new credit cards. It's ironic that the credit
that can cause some people to get into financial trouble is just what is needed
to rebuild credit reputations. Initially it may be easier to get a secured
credit card, but after a year of good history, you may be able to negotiate an unsecured
card. Only use the card for expenses you can pay off at the end of each month,
and don't apply for more than one or two. Maxed-out credit cards and frequent
credit applications will hurt rather than help your new credit.
Consider pre-approved credit offers. If you get a pre-approved
credit card application in the mail, read it carefully before signing up. These
credit offers can be good ways to begin a credit history as long as you use a reputable
company and use the credit you receive limitedly.
Ensure your new credit is being reported. Because you're
trying to establish a high credit rating, it's imperative that your creditors report
your activity to the credit bureaus. Make sure that whatever credit card you
obtain is reported and that you use it carefully to ensure the things reported only
help your credit.
Obtain credit through your financial institution. After
you've had checking and savings accounts in good standing at your bank for a year,
try applying through your bank or credit union for a MasterCard or Visa.
Try finding a co-signer. To do this, you must know someone
who has good credit and who is willing to co-sign on a credit card with you.
It's important to realize that if you default on your credit card and don't make
payments or pay off the loan, your co-signer will become responsible for your debt,
and that person's credit rating will suffer. This is not a relationship to
be taken lightly.
Be wary of schemes. One new scheme being used on those who
need to reestablish credit takes advantage of the authorized user listed on a credit
card account. These companies pay $50 to$150 to cardholders in good standing
for them to add authorized users to their account without giving the new users the
cards to use or the account numbers associated with the credit account. The
companies arranging this then charge the new "authorized users" a hefty fee.
Parents have been doing this for free for a while as a way to give their kids a
head start, but using this method can be a risky business. If you are tempted
to do something like this, proceed with caution.
Push through high interest rates. To reestablish credit,
you first need to qualify for and obtain credit. You'll probably be paying
inflated interest rates in the beginning, but after you've proven that you can make
your payments on time, you may be able to qualify for lower interest loans and credit
cards.
As you continue to be careful and wise with your credit, your credit rating and
credit history will improve. With these tips, you'll be able to build both good
credit and good financial habits that you can keep and follow far into the future.