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REBUILDING YOUR CREDIT |
~ BOWMAN'S MONEY COLLEGE CREDIT LESSONS ~ |
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EXAMPLE OF HOW THE CREDIT SCORE AFFECTS YOU
STEP ONE - CHECK YOUR CREDIT REPORT
STEP TWO - RAISE CASH TO PAY OFF CREDIT
STEP THREE - PAY A CREDIT ACCOUNT OFF
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How to rebuild your creditYou are starting over. You are tired of the stress, fewer choices, rejection, and the poorer quality of life that came with your unmanaged income. Now that you have a budget and a financial plan in place you will know where your money is going and how to use it more effectively. Now you want to begin the process of rebuilding your credit score to over 720 so you can get rid of the worries, have choices, have creditors asking YOU for your business, and giving yourself and your family a better quality of life. Time is what's needed to repair a damaged credit history and low score. However, there are things you can do to speed up the process. The following guide will walk you through steps you can take to rebuild credit.
1. OBTAIN A PAPER COPY OF YOUR CREDIT REPORT FROM THE 3 REPORTING BUREAUS Log onto www.annualcreditreport.com and follow the steps to obtain a copy of your three credit reports. You’ll find it is easy to do and there is no need to pay anyone to do this for you. I prefer to print out a copy of my reports, but you can also view yours online. Once you have received the reports scour them for errors. If you do find something that needs removed or corrected send a letter, along with any proof or documentation, that asks for the errors to be removed or corrected with the correct information. Don't hesitate to question any part on the report you don't believe is correct. My experience has shown that all three bureaus are very reasonable when it comes to making corrections. If you are not sure what to look for be sure to ask for help. It is important. When you request your credit reports also take some time to review how your social security number is being used. Make sure you know everyone that has access to it, including family members, and make sure you are comfortable with that. Question anyone that asks you for this number. With growing concerns about how malicious use of your identity can destroy your credit rating everyone should understand the sensitivity of the matter and understand why you would question them.
2. RAISE EXTRA CASH
TO PAY DOWN DEBT ASAP Raise extra cash to pay down credit debt now by selling some of your non-essential things. Borrowing new money in order to pay off old credit debt doesn’t make much sense. (The exception would be if the new money is interest free or offers some value generating perk that makes it a good deal where you can demonstrate that the benefit outweighs any cost.) Look for items in your house that could have value to someone else but are no longer of use to you. More 3. PICK ONE OR TWO ACCOUNTS YOU CAN PAY OFF NOW. Now that you have raised some extra cash through cutting costs, selling old junk, or earning some money on the side you should completely pay off as many credit accounts as you can. Paying off just one loan in its entirety will boost your score as it will count as a satisfied account. Typically, in order to get started, you would pick the account that you owe the least amount of money on. That way you can get it done quickly and start getting the benefit of a satisfied account on your credit record! More
4. FOLLOW YOUR BUDGET AND PLAN AND PAY ALL YOUR BILLS ON TIME This part makes a big difference. You have to show that you are responsible with your money. Your ability to pay your debts on time is a factor credit companies will look at when determining how much money to lend you and at what interest rate. Paying your bills on time does take planning, but by creating and following a realistic budget and financial plan it will become as automatic as brushing your teeth in the morning. More
5. START PAYING FOR YOUR REGULAR EXPENSES WITH CREDIT At this point I am assuming you have successfully accomplished all the above steps. This next step will use your every day purchases to demonstrate to lenders that you are responsible about paying back the money you owe! During this time you will continue to set aside real cash to pay for your usual expenses as planned in your budget. Only now you will responsibly use your credit accounts to pay for every day purchases. The purchases on credit are backed with real cash you’ve set aside, but moderate use of your credit accounts and timely payments strengthens your credit history and boosts your credit score. A good credit score, built on responsible shopping behaviors, puts you in a better position to save on other expenses, such as insurance and interest rates. Remember, irresponsible use of credit for purchases that are made without real cash set aside is very dangerous! Just like credit can be used to build you up, irresponsibly used credit breaks you down. Read more 6. CREATE A LIST OF CREDIT ACCOUNTS THAT BENEFIT YOU Once you have begun paying down debt with the extra cash you are raising it is time to list all the credit accounts you believe will offer you more value (cash back, points, rewards, etc) in addition to convenience. This list will be important for step 7 and it will strongly support your efforts in step 5. You can use websites like www.cardweb.com and www.creditcards.com to find credit account options. Those sites will list cards that offer various incentives. In some cases they will also tell you what kind of credit you will need to get the account (average, good, excellent). More Timing is critical with this next exercise. How you 1) apply for new credit, 2) close credit, and 3) ask for credit increases will affect your score. Doing all of these activities at once can deliver a strong enough blow to your credit score to knock it off its feet for an extended period of time. Your activity is reported very quickly to the credit bureaus and lenders will see activity on your credit report as new as yesterday. Completing these activities one at a time every three to four months has a less detrimental affect on your credit score. More 8. START MAKING CREDIT PURCHASES THAT PAY YOU INTEREST After you have achieved a credit score of over 720 you will be in a position to take advantage of bigger savings when it comes to purchases. You should now start qualifying for 0% interest, "same as cash" offers, and other money saving finance offers. This is the best situation to be in. It is an easy way to make, save, and get more for your dollars while enjoying justified purchases. Let’s discuss why. More
Getting started Regardless of what you may have heard you CAN rebuild your credit score and become one of the people who get the best deals, the better quotes, and even the better jobs. It does take time and you have to follow a plan. These 8 steps will turn the tables in your favor. Credit will no longer be holding you down but rather building you up. The starting point is finding out what your credit score is right now. It may not be as bad as you thought! I had a friend that assumed because she was divorced her credit would be bad and was afraid to check her score. She was happy to find that her score was not bad at all. The act of divorcing one's spouse does not necessarily mean you will have bad credit. Both her and her ex husband had been responsible about their finances. Once you know where you stand you can compose a plan to get you where you want to be. Let's say Joe has a score of 550. Not so good. His goal is to get to 720. Knowing the starting point and having a goal will allow him to customize a plan of action. In this example if Joe would like to accomplish this goal in 2 years he will have to aggressively manage his income and credit habits through the steps listed above. The best thing you can do is to get started now. Don't be afraid to ask for help. Be sure to regularly scrutinize your personal situation and look for ways to make your money work for you. Get your budget and plan written and check it often for needed adjustments. Set your goals and get to work! Click here for the best place to start. How to contact the credit bureaus: Experian P. O. Box 9595, Allen, TX 75013-9595 Tel: 888-397-3742
Equifax P. O. Box 740241, Atlanta, GA 30374-0241 Tel: 800-685-1111
Trans Union P. O. Box 1000, Chester, PA 19022 Tel: 800-888-4213 Source: www.bcsalliance.com |
STEP FIVE - MAKE CREDIT WORK FOR YOU NOT AGAINST YOU
STEP SEVEN - MARK YOUR CALENDAR
STEP EIGHT - MAKE PURCHASES WITH CREDIT??
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One very important thing to remember when reading these ideas is that you
MUST be honest with yourself. You have got to follow your budget and back up
any purchase with real money. The thing that always makes people fail
regardless of what program they are using, is that they stop following the
program and wing it! You will fail if you do this.
