ANSWERS: 3
  • Repairing your credit can be tricky. Depending on how bad it really is, you might consider bankruptcy, but only if it's so bad that it can't really be fixed. Filing bankruptcy here in the U.S. just got (or is about to get) a lot harder, as congress just passed a law designed to stop people from running up a bunch of debt, then just filing bankruptcy to erase it all. This should be a last resort anyway. If you just have a bunch of late payments, or a high debt/income ratio (you have lots of debt, but NOT lots of income). Pay off any high interest credit cards you have, or if possible, get a home equity consolidation loan. The key here is getting things under control. Until you get to the point you are trying to reach (a better credit rating/report) don't incure any NEW credit- with one exception (consolidation loan does't count, as long as you only borrow enough to CONSOLIDATE your bills, not a little extra to take that trip to Cancun you been dreaming of). A good way to build some positive credit is to go to your local bank, and talk to the loan officer. He/she will be happy to help you set up a secured loan of some kind. You can open an account a reasonably small amount of money, say $400-$500 and use that account as collateral against the loan. The bank stands to lose very little, since your loan will be secured, and you can make the payments on the loan on time or early for 8 months to a year, and then start over again, and maybe this time, having established a relationship w/ the bank, they may not even require the secured account. The key is, you have to make repairing your credit a priority in your financial life, and just forget about buying anything you can't pay cash for. Before you know it, your credit will improve, and you will have a new appreciation for managing it. One note on repaying your loan- make sure you pay on it for at least 6 months, as anything short of that would not be reported to the 3 major credit reporting bereaus (Hope I spelled that right...never can remember that one). One last thing. There are companies that offer credit repair services. They basically get paid to do the same thing that you could do yourself- the sent a deluge of letters to the credit bueraus (there's that word again...that looks right this time), disputing various items. It doesn't matter if you took out a loan on a new Ferrari, and never made a payment, if you dispute it, and the company that gave you the loan doesn't show proof that you do indeed owe the money, or that you didn't make the payments as promised, they have to remove the negative items. I have no first hand expeiience with this type of thing, but my Uncle used one of these places, as says it helped-A LOT..I dunno. I won't post a link to the place here, since I don't know for certain that they are legit, but a web search will turn up plenty of results. Either way, good luck!
  • The other poster provided quite good information, but one important point was missed. Once you have cleared a debt to a lender, you *must* ensure that they update your credit rating. While companies are quite efficient when they submit a bad rating, they are often quite slow to remove it. Entries are sometimes never corrected, providing no end of problems when you wish to borrow at a later date. Although you must allow some time them to update your rating, you need to ensure they have been corrected by requesting a copy of your file from the rating agency the lender used. You also need to view your rating to ensure that any personal information is correct. Companies occasionally submit incorrect personal information and lenders will use it to assess your risk as a borrower. I know people who have had problems borrowing money because lending agencies had failed to update their rating when their debts were cleared and had listed an incorrect number of dependents. The number of dependents you have affects your ability to pay and how much you can borrow. Unfortunately, it is your responsibility to ensure your rating is correct, not theirs.
  • UK perspective: Start by repaying all your outstanding debt. You won't get anywhere without doing that. Then apply for a credit card with a ridiculous 30% or similar rate of interest (It'll be the only kind you'll be able to get, but unless you've been bankrupted in the past very few people have such bad credit that they won't find some dubious bank to give them credit at a silly rate) Now use it to buy a packet of gum or bar of chocolate once or twice a month- nothing more than a few pence that you can be certain of being able to repay in full at the end of the month before your grace period (time between purchase and payment being due) runs out and you start being charged interest. Repay the amount in full and on time. Continue this for around a year, then cut up the card and cancel your account. Your credit rating won't be "repaired" but it will have significantly improved. Info from www.moneysavingexpert.com

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