How to Rebuild Credit Loans

Using new loans to rebuild your credit can be smart. Your biggest challenge will be getting approved for new credit while your credit scores are still poor. However, it can be done, even if means taking out a few small loans over 12 to 24 months.

Instructions

1

Open a savings account with a bank or credit union that offers secured credit cards. Secured credit cards require you to maintain money in a savings account that is used for collateral for the card. The amount on deposit generally becomes your credit limit. You can't withdraw the money while it is being held. That makes the secured cards easier to qualify for--even after bankruptcy. Keep putting money into the savings account until you have enough to qualify for the secured card--typically a minimum of $300. Apply for the credit card, which for rebuilding your credit, is just like a loan. After all, the credit limit represents an approved loan. Rebuild your credit by making a few charges on the card each month, but stay well below your credit limit and never miss a payment.

2

Open a second secured credit card, perhaps with another bank in your area. Or find banks online offering secured credit cards. Check credit card comparison websites (see Resources) to find cards online. Carefully manage the second secured credit card by making timely payments and staying well under the credit line.

3

Contribute more money to your bank savings account until you have accumulated say, $2,000. Then apply for an installment loan using the additional savings as collateral. Installment loans require you to make fixed monthly payments. Place the proceeds from the loan into your savings account and direct the bank to draft the account each month for your monthly payment. Continue managing your new accounts as you rebuild your credit.

4

Apply for an unsecured card after about 12 months, or a department store credit card. Getting approved will show that your credit rebuilding efforts are working. If you're declined, simply continue with your plan using the secured credit cards and loan.