It seems like so long ago but I still remember what it was like. My credit had been destroyed by my own hands, or lack thereof!
At first, I made enough to pay the bills; I was just too lazy and didn’t truly appreciate the impact of unpaid bills.
The day and my plummeting credit score finally caught up with me. Bills eventually exceeded my ability to pay and I had even tried the debt consolidation approach with dismal results. Eventually I my credit card was cancelled by the card company.
Once I got my debts resolved I was still left without credit due to a poor FICO score. So the question, if you are faced with the same situation is how do you repair your credit if nobody will give you credit?
There are actually several options but make no mistake, each takes time and each requires that you consistently pay the bills on-time and in-full!
1) Establish a checking account. Always insure that you have the reserves to cover every debit charge and check you write. Never allow an overdraft. When you have no credit or bad credit reliable use of a checking account might be the only thing you have to begin establishing some level of trust with potential lenders.
2) Make sure your utilities and leases are in your name. Showing that are responsible with monthly expenses will begin the credit repair process.
3) Get added to an established account. This is not the same as getting a co-signer as the card is in another person’s name. Be it your mother, your spouse’s they are simply adding you as an authorized signer. The impact to your score however will be minimal. Regardless, you will both be liable for the total bill. It’s a lot to ask of someone else and is likely to strain an important relationship.
4) Get a loan – Traditional loans are also factored into your credit score. With a poor credit score this can be a challenge itself but you do have some possibilities:
- Secured Loans – If you have anything of value that can be used as collateral against the loan you have a better chance of qualifying.
- A Co-signer – Get somebody you trust to be a co-signer to the loan. Like #3 above this can cause a strain to an important relationship so tread lightly and fulfill your commitment.
- Be the co-signer – If you know somebody else that is getting a loan ask to be a co-signer on their loan. This may cause less strain to a relationship as you are just riding their coattails. But realize being a cosigner means you are liable. Make sure you trust this person.
5) Sign up for a charge card. Cards such as American Express and Diners are not credit cards, you total balance is due at the end of the month. But a history of timely payments will help improve your score.
6) Shop – Sounds crazy but at a few stores with branded credit cards such as Sears and Kohl’s they often offer an instant discount if you sign up for their card on the spot. Be warned though, these cards have high rates and missing one payment can be painful.
7) Secured Card – Some banks offer secured credit cards. In effect you pay the bank prior to making any purchases. The per-use and annual fees can also be exorbitant but that might be the price you have to pay to establish credit on your own.
If you find yourself in this position and manage to claw your way back to a decent credit score please just make sure you have learned from your mistakes; don’t let it happen again.
Carnivals that have featured Eliminate The Muda posts this week include:
Festival of Frugality – Hosted by Foreigner’s Finance – Austin the blog’s author is a lucky guy living in my favorite foreign country Japan. This week he wraps up the decade with a long list of frugal blog links.
Carnival of Personal Finance – Hosted by Gather Little by Little – Mike shares what he liked most about the last two weeks of this year. He has some great suggestions on how to get ready for the next year and is even giving away a free Google coupon!
Carnival of Money Stories – Hosted by our friends to the North at the Canadian Personal Finance Blog – A Cajun in Canada blogging about boxing? Hey, you just have to go see for yourself!