Some people make big mistakes with their money, especially when they are young. These financial mistakes can result in poor credit that can prevent people from buying a new home or a new vehicle. However, you can work to improve your credit by utilizing tools that you have access to, even if you have bad credit.
Small Secured Loans
Some places will allow even those with bad credit to get a loan, as long as the amount is small or the collateral is sufficient. Some companies even advertise bad-credit loans that can help you to improve your credit. However, these loans will generally carry a high interest rate and these lenders may be stricter about payments. These lenders should never ask you for a fee to apply or require that you purchase a list of potential lenders that commonly offer bad-credit loans.
Secured Credit Card
Once you have bad credit, many credit card companies do not want to take a chance on you. Credit card debt is unsecured, and is, therefore, at a greater risk of being discharged in bankruptcy. Secured credit cards work more like a debit card does. You put a specific amount of money onto the card and then use the card to make your purchases. You use the money you put on the card, so there is no risk to the credit card company, and the company reports your good payment history to the credit bureaus.
Co-Signer
Some lenders will not give a loan to anyone who has bad credit. However, you can still build your credit by asking a friend or family member with good credit to co-sign for you. This gives the lender additional reassurance that the loan will be repaid. When you use a co-signer, though, you are putting his credit at risk, as well as your own. Make sure that your co-signer understands this and let him know that you will pay the loan back properly. This method requires a lot of trust.
Debt Consolidation
Debt consolidation companies help you to combine all of your high-interest payments into a more manageable monthly payment. They negotiate with your credit card companies for lower rates or pay off your credit cards for you and take over the debt owed. When these companies take over your debt, however, your credit card accounts are closed and you can no longer use them. Do your research on any debt consolidation company to ensure that it is legitimate and has a proven track record of improving credit.
Rehabilitate Student Loans
If you have student loans that have gone unpaid, rehabilitating them can go a long way toward restoring your credit. Contact your school to find out how to apply for a student loan rehabilitation. The loan company works out a payment plan with you and requires you to make regular payments over a period of 12 months. Once you have made these payments, the company reports your good payment record to the credit reporting agencies, improving your credit.
0 comments:
Post a Comment