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Equal Housing Lender
Like it or not, your credit will follow you through life!
I often come across people with really terrible credit. Most of the time, they were simply not educated about credit until it was already too late.The good news is even the very worst possible credit can be improved with time and systematic effort.
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From the very, very worst (low 400's FICO), on up, here are the steps you'll need to take to improve your situation. 1. Below 499 score. Get secured financing, and make sure EVERY payment is made a week early. No "check is in the mail", no bounced checks, in short, do whatever it takes to see that every payment is made a week early. Why the week early? Because if there's any problem whatsoever, you need to time to resend a replacement check or pay by phone. These creditors prey on weakness, and it seems they want you to be late so they can charge you more. What sort of secured financing? Well, the best option is to go to your bank or a local credit union, and open a $1000 CD, with a $500 loan against that cd. You can have horrible credit and still get this loan, because if you don't pay, they simply keep your $1000 Certificate of Deposit. You don't really care if the CD yields only 2% and the loan charges 12%, because you're getting this for the sole purpose of raising your credit. Note the loan must be six months or more to report to credit, and verify with the lender that they do indeed report (most do). The next option is refinancing your car. People often get bad credit by spending more than they can afford, so I don't advise buying a car from a lot, as the financing provided there may be far less favorable rate/terms than going to a local credit union. A small, locally-owned bank or credit union may have more options than a large chain when it comes to really high risk (e.g. bad credit) loans. |
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The last option is Rent-to-own stores. Note these stores prey on desperation, so be very prudent about what you can really afford and expect to pay more for less - remember, all you care about is that EVERY payement is made EARLY so it reports to credit. Finance the smallest item that will report for only six months. Note if you have good credit (600+), even the presence of this type of financing will bring you down, because they're associated with people who don't manage their finances.
2. 500 to 540 score. Apply for a higher risk credit card. I'd suggest starting with Capital One, though Orchard and several other banks have options as well. Pay special attention to the annual fees; some of these are outrageous - but again, all you care about is fixing up your credit. You'll only keep this card for a year anyway, and during that year you'll make EVERY payment EARLY or on time, and watch your score come up. As it rises, you'll replace that with lower interest / lower fee cards.
| Apply, a month
or two later, for a gas card. Keep the RATIO low, e.g the balance,
as these have a very low credit limit. For example, a $380 balance
on a card with a $400 limit will drive your score down (because it's
95% of the available credit), whereas a $200 balance on a $10,000
limit card brings you up (because it's only .028% balance). Any
balance above 30% reduces your
score.
Note if you get declined by either of the above, you'll be able to request a free credit report and see how your progress is moving - just follow the directions in the letter the card companies send out. 3. 540 to 620 score. There's no magic bullet here; simply keep ratios low, payments on time, and increase your tradelines if less than 5-7, or decrease them if over 12. All the above will raise your score over 600 in the course of a year or two. Use all revolving credit every 5 months; e.g. those small store credit cards - charge $10 on them, carry a balance, and pay it off when the bill comes, as with 6 months of inactivity the account stops helping your credit score. If you're looking to buy or refinance, the right loan can speed up that process - and when the scores get to 630+, we'll refinance you into the "A" paper loan you deserve... and earned! We have 100% Financing available from a 560 score - Don't wait to buy the home you want! |
More Resouces: How
to contest incorrect credit items |