If you've trashed your credit, or just want to improve you credit before making a major purchase or searching for a new job, it may seem ironic, but using credit is your best bet. While using credit cards or other revolving credit lines will do the most to improve your credit, secured loans can also help you raise your credit score within a few years.
What is a Secured Loan?
A secured loan is backed by an item, such as a car, boat, motorcycle or even a home, that stands good for the loan. Some secured loans are guaranteed by money rather than an item; certificates of deposit or savings deposits are used to collateralize the loan in the event that you do not repay it.
How Quickly Will a Secured Loan Help My Credit?
Your credit history is referred to as "history" for a very good reason: it reflects years of credit use, or abuse. Improving your credit, therefore, is not something that can be done overnight. Using a secured loan or any other credit resource to rebuild your credit means paying as agreed and on time for a period of 12 to 36 months. Your credit score will begin to improve incrementally during that period, but the longer you pay as agreed on your loan, the better your credit score will be.
How Do I Get a Secured Loan?
You will have to get a lender to agree to give you a secured loan before you can begin to rebuild your credit by paying on the loan. If you're using a CD or savings account, you're in luck. "A loan of $500 should be sufficient, since it's for the purpose of improving your credit report, although for credit score rebuilding, the larger the CD loan or passbook loan, the better," writes Bankrate's Steve Bucci. If it's a car or other item you want, you may have to provide a down payment, or take out a loan that's less than the full amount of the purchase price, in order to qualify.
What if I Can't Get a Secured Loan?
If you can't qualify for a secured loan, you can almost certainly qualify for a secured credit card. Like a loan secured by a CD or savings account, a secured credit card is guaranteed by a deposit you make with the card issuer. After 12 to 24 months of paying as agreed, your credit will be improved, and the card issuer will likely offer you a regular credit card.
0 comments:
Post a Comment