There may be many reasons why you have a bad credit report. You may be young and have never used any credit yet. You may have just come out of bankruptcy and because you are too scared to repeat your past mistakes, you start paying for everything in cash. This is not a good idea because if one day you apply for a car loan or a home mortgage you will have no credit history.
A person with no credit, even though they may be completely debt free is worse than a personal with a bad credit history. Creditors want to see how you manage debt and a good credit history speaks volumes about your responsibility and approach to debt. An individual with no credit history may be considered very high risk.
It takes time to build or rebuild your credit report. It won't happen overnight but you can do it if you put your mind to it. Don't fall for scams from credit repair agencies that will offer you a fabulous credit report in a matter of weeks. It simply is not true. Building credit takes time and you have to work at it.
The first thing you must do is make sure that there are no errors on your credit report. Ensure that any debt that you have paid off is no longer showing on your credit report. Companies can be slow to report to the credit bureau so you must take charge. Examine your credit report carefully for errors and mistakes. Get your credit report as clean as it can be before you start applying for new credit.
Now you are ready to start building your new and improved credit profile. Choose the type of credit that you want very carefully. Too many applications for credit can have a disastrous affect on your credit rating. If you currently have numerous credit cards all maxed out, consider a debt consolidation loan to pay off all the existing credit cards. If you get approval, you will have one monthly payment which should be far less than the minimum payments required on your credit cards. The interest rate should also be considerably lower.
If you have a friend or family member with whom you have an excellent relationship, and who has an excellent credit rating, you might consider asking him or her to add your name to one of their credit cards. They will have to ask their credit card company to add you to their account as an authorized user. Once you receive your credit card on this account you can simpy give it to your friend. The idea is not to use the card but to show that you have a credit card account in good standing.
Another excellent way to build or rebuild credit is to get approved for a secured or prepaid credit card. All you need is a savings account and you will be required to make a deposit into this account to secure the credit line. In this way you are spending your own money and there is no risk to your credit whatsoever. Many of these cards look just like a regular credit card and can be used in the same way, so there is no reason to be embarrassed. No one will ever know that your card is prepaid!
Another very useful way to improve your credit is to apply for easy credit. Many stores and even some gas companies give credit to those without a credit history. Their interest rates may be high, but your purpose is not to use the card so much as to establish credit. Put the card away in a safe place or use it very carefully, making sure to pay off the small balance each month. This is another excellent way for you to create some credit history or to restore poor credit into great credit.
As you can see, there are many ways to create or improve credit and these are simple steps that you can do if you put your mind to it. The most important message of all is to spend ONLY what you can afford. Use your new credit cards and credit lines minimally each month, to show activity, but refrain from any kind of large purchases or excessive spending. This will destroy your credit and put you right back to square one. Pay your bills on time each month, and if you absolutely cannot afford to pay the balance in full, at least pay the require "minimum" payment.
Before you will be taken seriously by any loan lender, you will need to show at least one to two years of excellent credit habits, especially if you are considering buying a home. Mortgage companies tend to be more strict in terms of credit ratings, so if you want to look forward to the prospect of one day owning your own home, you know what you have to do. Take the first step to financial dignity and you will never look back.
About the Author
©Copyright 2005. Caitlin Crosain is a successful writer and publisher of resource websites on how to
Repair Bad Credit, qualify for
Secured Credit Cards and
Bad Credit Auto Loans and Personal Loans.
