Rebuilding Credit
As most of the nation, Americans have felt the downturn in the economy recently. Its effects nationally are unspeakable. Unemployment rates, foreclosures are just among a few of them. Credit scores have been sacrificed for numerous people due to financial issues. People who used to be on sound financial footing are now slipping uncontrollably. Credit scores that used to be high are now mediocre to bad. Citizens who at one time were a good credit risk suddenly realize that their scores indicate that they are a bad risk. It is a frustrating scenario, especially for Americans who have never dealt with these issues.
The good news is that there are ways to rebuild your credit score in a relatively short amount of time. There is a saying out there “to get credit you must use credit”. The problem that arises is if you are labeled as a “credit risk” it may prove difficult to qualify for a credit card. Therefore, you may think you are at a dead end. This is not the case; you are simply at a detour.
Secured cards have proved to be a wonderful stepping stone to building credit. Secured cards require that funds be put into an account to insure that if payments are not made the money is there. Think of secured cards as an insurance policy. You don’t want to have to use it, but it is there in case the unexpected happens.
Rebuilding credit takes patience and dedication. A major factor in your credit score as we spoke about previously is your debt to credit ratio. In this economy it is difficult to pay necessities, no less pay down credit card bills, however it will greatly improve your score. The first step is to discontinue charging on any credit cards that have high balances. Next, set up a consistent payment plan to reduce the balance. Understandably this will not happen overnight, however as time passes you will notice a reduction in your debt and a raise in your score.
Another factor to rebuilding your credit score is paying bills on time. Bill pay, which is offered by many banks, is a great service to take advantage of. Bill pay is set up through your financial institution directly by providing the names and addresses of your creditors. You designate a day of the month that you would like the bank to withdraw the funds from your account and send a check to your lender. This service insures on time payments to all creditors you have elected. The disadvantage to this service is if the money is not in your account you could incur fees for bouncing the account.
Finally, watch your credit consistently. Dispute any inaccurate information. Pay off any collection accounts to the best of your ability. Fortunately, the older the account the less affect on your credit score. Don’t make a habit of applying for new credit, as this will have a negative effect on your score. Furthermore, avoid closing older accounts, especially accounts that are in good standing since 15% of your credit score is length of credit history.
Keep in mind you didn’t get into debt in a few days therefore you will not get out of debt in that time period either. Stay focused though and you will see the light at the end of the tunnel. Good luck on your journey to rebuilding your credit score!
