How to Re-Establish Credit
How to Re-establish Your Credit
If you had a bankruptcy you will need 24 months of clean credit history from the date your bankruptcy was discharged in order to be approved by a bank for a loan. That's the bad news. But for those of you who did not have a bankruptcy, the rules are basically the same.
1) You will need a minimum of 2 secured credit cards ASAP. (Getting 3 cards is even better.) A secured credit card is like a debit card. You pay a certain amount up front and it is deducted from your account as you use the card. However, unlike debit cards these cards are reported to the credit reporting agencies.
2) Use the links below to apply for 3 credit cards. Print out the applications, fill them out and send in 3 different applications @ $300 each (this is an example). Keep the balances at $100 or less and always pay them down to $10 each month. This ratio is designed to maximize your credit worthiness in the shortest time possible. If you are not comfortable with a $300 limit, by all means do $200 instead, but lower the balance accordingly. With a $200 card, your card balance should always be less than $100. If it goes above that you will lower your credit score!
Using your credit cards on a monthly basis, keeping their balances down and paying on time are the best things you can do to get your credit score back up quickly. Here are some links to try:
Applied Bank One of the best benefits of this card is that card holders can make all purchases without paying interest. In exchange for this benefit, Applied Bank makes up for the 0% APR with a $9.95 monthly maintenance fee. The credit line on the Platinum Zero® Secured Visa® Credit Card from Applied Bank® can be anywhere between $500 and $5,000. If you need to make a cash advance, which should be avoided if at all possible with any secured credit card, the cash advance APR is 9.99% variable.
Applied Bank® Secured Visa® Gold Credit Card. The Applied Bank® Secured Visa® Gold Credit Card does not change an account set up fee or a monthly maintenance fee however they charge consumers a $50 annual fee. There is no grace period for purchases, so the interest rate will be charged the day following all purchases. This card comes with a fixed 9.99% APR and the credit limit can be between $200 and $5,000.
Capital One® Secured MasterCard® Credit Card. Similar in structure to the Citi Secured MasterCard, the Capital One® Secured MasterCard® Credit Card offers a low annual fee of $29 and a high purchase APR of 22.9% annually. Also similar is the opportunity to convert this secured card to an unsecured card after a long history of good standing with Capital One. The card allows customers to change the deposit amount or credit limit regularly.
For someone building or fixing their credit — an important factor when you need to acquire a loan or mortgage within a year or two — secured credit cards are good options when unsecured cards are unavailable for any number of reasons. The fees or high interest rates, as listed above, do not make these cards great options for everyday spending. Those who do need a secured credit cards should think about moving to unsecured credit as soon as possible, and as listed above, some of these cards make that transition process simple.
3) You will also need a clean rental history. That means no 30 day late rental payments. Most lenders require at least 3 trade lines (open accounts) of a 2 year history for loan approval. It doesn't matter what you rent - an apartment, townhouse or single family home. As long as you pay your rent on time and do not get any 30 day lates on your credit report, your credit score will continue to go up. If you get even one late, you'll have to start all over again.
4) Finally, you should know that no consumer has access to the information that is listed on a "lender" credit report. Therefore if you are relying on any of the three credit bureaus (Experian, TransUnion or Equifax) to provide you with your credit score - don't! Let your bank, credit union or loan officer of your choice pull your credit for you. This shouldn't cost you a dime and if they want to charge you - call or email me and I'll have my loan officer run it for you. Also, don't be surprised if there is wrong information on your credit report - 86% of credit reports have erroneous information on them. Problems are generally easy to fix and the credit card companies have to address your concerns within 30 days or the item has to be taken off your credit report.
So there you have it. Now that you have the information it's not that difficult at all now, is it? When you're ready, I'll be here to help you find your new home. In the meantime, happy charging!
