You Can Establish New Credit!

By: John Dow

Time is on your side and if you can demonstrate that regardless of your past issues you are now on the straight and narrow path to good credit, it counts.

Many of the negative items on your credit report can represent up to 20-25 points. So if you get 2-3 items removed, that can mean up to a 75 point increase in your credit score. That can make a huge impact on your credit cost.

Once you review and remove any negatives that you can, the next step is to establish some new positive entries. This may take a little time but can absolutely increase your credit score dramatically.

And once your score is raised you can then go back and refinance any active credit based on this new score. Which means you can save a bunch of money by getting a much lower interest rate, and payment.

One area often looked at is the balances on your current credit card accounts. Look at all your balances and create a payment plan to start lowering the highest first, then work on the rest. Even if you can only pay down a little each month, it can make a difference to someone who is reviewing your credit history.

There are three good sources to help you revive your credit score with some good entries. You want to go to a creditor that reports to the Credit Bureaus on a regular basis. Large appliance dealers (a good example here in Texas is Conns – www.conns.com ), your local bank of choice, and any of the national credit card companies.

Keep it low key, the purchase staying under what you know you can pay off early.

Say you need a new refrigerator anyway so you go to the appliance store and pay down half, and finance the balance over 12 months. You want the contract to go at least 6 months and then pay it off.

Go to your local bank and get a small loan for something that has collateral, like a lawnmower or something in the $500 range. If you’re in really bad shape, offer to put the $500 in a savings account to guarantee the loan. Once again pay on the note for 6 months and then pay off the remainder.

Find a credit card company that will issue you a small amount credit card. The Bankrate web site is a good place to start (http://www.bankrate.com/brm/rate/cc_home.asp ). The interest rate really doesn’t matter since you are going to charge a very minimal amount each month and pay it off early each month. As long as you pay early they will slowly raise your credit limit and report good payment record.

Make sure you always pay early on any new credit purchases. This is critical to establish new paying habits that are clearly visible to any one who reads your credit report. Since most companies grant credit based on the risk, this clearly demonstrates that you have current positive credit entries in your credit file.

Start a savings account at your local bank or join a Credit Union. That’s a good idea anyway even if you can only put in $10-20 a week or month most lenders consider it a positive.

So in 6-9 months you will have three good account listings with the Credit Bureaus. You can continue to find small purchases to finance with different creditors in the next 6-9 months and do the same routine.

In that same time period the older negatives will roll off or at least diminish in value in considering you for new credit. We call it drawing a line in the sand and it’s been very effective way for building new good credit entries.

The key elements is to let the short term financing is to go for at least 6 months (paying early) and then pay it off. Same with the credit card account, pay it off early each month. This provides some current good credit entries which can really help raise your credit score.

So before you apply for credit, check your credit reports and see if you can remove any false or incorrect negative entries. If you have some negative entries on your credit report that you can have removedFind Article, this is well worth the time and effort.

Don’t pay for something that you can get for FREE. Go to the Federal Trade Commission’s site here to get the full details of getting your free credit reports:

http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm

Everyone should check his or her credit report each year. It’s now Free and won’t take much time as long as you stay on top of it. You can request one credit bureau at a time every 4 months and have a good idea of what’s been entered in the past 12 months.

Credit Matters
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